Exhibit 5
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
by and among
the Selling Stockholders listed herein, as Seller,
Xxxxxx'x Food Stores, Inc., as the Company,
and
Western Real Estate Services, Inc., as Buyer, and
Western Investment Real Estate Trust, as Western
dated as of September 29, 1998.
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS; PURCHASE AND SALE; CLOSING . . . . . . . . . . . 1
1.1 DEFINITIONS. . . . .. . . . . . . . . . . . . . . . . . . . . 2
1.2 REDEMPTION OF SHARES OF STOCK PRIOR TO THE CLOSING. . . . . . 9
1.3 TRANSFER OF STOCK BY SELLER . . . . . . . . . . . . . . . . . 10
1.4 PURCHASE OF THE STOCK BY BUYER. . . . . . . . . . . . . . . . 10
(a) PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . 10
(b) ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . 10
(i) CLOSING BALANCE SHEET. . . . . . . . . . . . . . 10
(ii) LINE ITEM VALUATION. . . . . . . . . . . . . . . 11
(iii) ADJUSTMENT FACTOR. . . . . . . . . . . . . . . . 13
(iv) FINAL CLOSING BALANCE SHEET; POST-CLOSING
RECONCILIATION . . . . . . . . . . . . . . . . . 13
(v) PRE-CLOSING ESTIMATE . . . . . . . . . . . . . . 14
(c) ALLOCATION . . . . . . . . . . . . . . . . . . . . . . 14
(d) PURCHASE PRICE ADJUSTMENT FUND. . . . . . . . . . . . . 15
1.5 ELECTION TO RECEIVE DOWNREIT UNITS. . . . . . . . . . . . . . 15
(a) DOWNREIT ELECTION . . . . . . . . . . . . . . . . . . . 15
(b) ELECTION DEADLINE . . . . . . . . . . . . . . . . . . . 16
(c) FORMATION OF DOWNREIT; CONTRIBUTION TO DOWNREIT . . . . 16
(d) ELECTING STOCKHOLDER'S INVESTMENT REPRESENTATION. . . . 16
(e) PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . 16
(f) WITHDRAWAL OF DOWNREIT ELECTION . . . . . . . . . . . . 17
1.6 DEPOSITS . . . . . . . . . . . . . . . . . . . . . . 17
(a) PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) REFUNDABILITY . . . . . . . . . . . . . . . . . . . . . 17
(c) PAID TO SELLER AT CLOSING . . . . . . . . . . . . . . . 17
(d) OTHERWISE PAID TO THE COMPANY . . . . . . . . . . . . . 17
1.7 DUE DILIGENCE PERIOD. . . . . . . . . . . . . . . . . . . . . 17
1.8 THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.9 POSSIBLE RESTRUCTURING OF TRANSACTION . . . . . . . . . . . . 18
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . . . . 18
2.1 ORGANIZATION OF THE COMPANY AND SUBSIDIARIES; POWER AND
AUTHORITY; RELATED MATTERS. . . . . . . . . . . . . . . . . . 18
2.2 STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 OWNERSHIP BY SELLING STOCKHOLDERS; ENFORCEABILITY OF
PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 19
(a) CURRENT HOLDINGS. . . . . . . . . . . . . . . . . . . . 19
(b) GOOD TITLE. . . . . . . . . . . . . . . . . . . . . . . 20
(c) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . 20
(i) CORPORATE STATUS; AUTHORIZATION. . . . . . . . . 20
(ii) ESTATE POWER AND AUTHORITY . . . . . . . . . . . 20
(iii) INDIVIDUAL CAPACITY. . . . . . . . . . . . . . . 20
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(d) TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . 20
(e) EXECUTION; DELIVERY; ENFORCEABILITY . . . . . . . . . . 21
(f) NO CONTRARY LAWS OR ACTIONS . . . . . . . . . . . . . . 21
(g) NO CONFLICTS. . . . . . . . . . . . . . . . . . . . . . 21
2.4 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES. . . . . . . . . 21
(a) FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 21
(b) INTERNALLY PREPARED INTERIM FINANCIAL STATEMENTS. . . . 22
(c) NO MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . 22
(d) NO UNACCOUNTED FOR LIABILITIES OR CONTINGENCIES . . . . 23
2.5 TAX AND OTHER RETURNS AND REPORTS . . . . . . . . . . . . . . 23
2.6 MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 23
2.7 REAL AND PERSONAL PROPERTY; RELATED MATTERS . . . . . . . . . 24
(a) CURRENT HOLDINGS. . . . . . . . . . . . . . . . . . . . 24
(i) LAND. . . . .. . . . . . . . . . . . . . . . . . 24
(ii) PARKING. . . . . . . . . . . . . . . . . . . . . 24
(iii) IMPROVEMENTS . . . . . . . . . . . . . . . . . . 24
(iv) LEASEHOLDS . . . . . . . . . . . . . . . . . . . 24
(v) LEASES . . . . . . . . . . . . . . . . . . . . . 25
(vi) PERSONAL PROPERTY. . . . . . . . . . . . . . . . 25
(vii) PLANS AND DRAWINGS . . . . . . . . . . . . . . . 25
(viii) CONTRACT RIGHTS. . . . . . . . . . . . . . . . . 25
(ix) OTHER RIGHTS . . . . . . . . . . . . . . . . . . 25
(x) APPURTENANT RIGHTS . . . . . . . . . . . . . . . 26
(b) EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . 26
(c) COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . 26
(d) DEFECTS . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . 26
(f) TITLE . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) CONTINUING OBLIGATIONS. . . . . . . . . . . . . . . . . 27
(h) UTILITIES . . . . . . . . . . . . . . . . . . . . . . . 27
(i) CERTIFICATES OF OCCUPANCY . . . . . . . . . . . . . . . 27
(j) ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . 27
(k) ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . 27
(l) LEASES. . . . . . . . . . . . . . . . . . . . . . . . . 28
(m) SUBLEASES PERMITTED . . . . . . . . . . . . . . . . . . 28
(n) CREDITWORTHINESS OF TENANTS . . . . . . . . . . . . . . 28
(o) SUBDIVISION AND ZONING OF LAND. . . . . . . . . . . . . 28
(p) BROKERAGE COMMISSIONS . . . . . . . . . . . . . . . . . 28
(q) CONSTRUCTION OF IMPROVEMENTS. . . . . . . . . . . . . . 29
(r) WETLANDS. . . . . . . . . . . . . . . . . . . . . . . . 29
(s) XXXXX . . . . . . . . . . . . . . . . . . . . . . . . . 29
(t) RENT CONTROL. . . . . . . . . . . . . . . . . . . . . . 29
(u) PUNCHLIST . . . . . . . . . . . . . . . . . . . . . . . 29
2.8 INTANGIBLE PROPERTY . . . . . . . . . . . . . . . . . . . . . 29
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2.9 AUTHORIZATION; NO CONFLICTS; ALL PERMITS. . . . . . . . . . . 29
(a) NO CHARTER VIOLATIONS . . . . . . . . . . . . . . . . . 30
(b) AUTHORIZATION BY THE COMPANY; ENFORCEABILITY; NO
CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . 30
(c) PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . 30
2.10 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS . . . . . . . . . 30
2.11 MINUTE BOOKS. . . . . . . . . . . . . . . . . . . . . . . . . 31
2.12 ACCOUNTING RECORDS. . . . . . . . . . . . . . . . . . . . . . 31
2.13 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.14 PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.15 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 31
(a) ORGANIZATION AND CONDUCT OF BUSINESS. . . . . . . . . . 31
(b) USE AND OPERATION OF PROPERTY . . . . . . . . . . . . . 32
(c) ABSENCE OF LOSSES CAUSED BY TORTIOUS NEGLIGENCE OR
MISCONDUCT. . . . . . . . . . . . . . . . . . . . . . . 32
2.16 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . 32
2.17 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . 32
(a) EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND
EMPLOYEE AGREEMENTS, AND SIMILAR ARRANGEMENTS . . . . . 32
(b) QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . 33
(c) TITLE IV PLANS. . . . . . . . . . . . . . . . . . . . . 34
(d) MULTIEMPLOYER PENSION PLANS . . . . . . . . . . . . . . 35
(e) HEALTH PLANS. . . . . . . . . . . . . . . . . . . . . . 35
(f) FINES AND PENALTIES . . . . . . . . . . . . . . . . . . 35
2.18 CERTAIN INTERESTS . . . . . . . . . . . . . . . . . . . . . . 35
2.19 INTERCOMPANY TRANSACTIONS; TRANSACTIONS WITH SELLING
STOCKHOLDERS AND THEIR AFFILIATES . . . . . . . . . . . . . . 36
2.20 BANK ACCOUNTS, POWERS, ETC. . . . . . . . . . . . . . . . . . 36
2.21 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . 36
2.22 ACCURACY OF INFORMATION . . . . . . . . . . . . . . . . . . . 36
2.23 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.24 RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.25 SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.26 BANKRUPTCY. . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.27 SETTLEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . 37
2.28 REVIEW OF THIS AGREEMENT. . . . . . . . . . . . . . . . . . . 37
2.29 CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . 38
2.30 CERTAIN TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 38
(a) NO TAX LIABILITY. . . . . . . . . . . . . . . . . . . . 38
(b) AUDIT MATTERS . . . . . . . . . . . . . . . . . . . . . 38
2.31 WARN ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.32 UNANTICIPATED LIABILITIES . . . . . . . . . . . . . . . . . . 39
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER AND WESTERN . . . . . 39
3.1 ORGANIZATION AND RELATED MATTERS. . . . . . . . . . . . . . . 39
3.2 DOWNREIT INTERESTS. . . . . . . . . . . . . . . . . . . . . . 39
3.3 DOWNREIT'S CONTRIBUTED PROPERTIES . . . . . . . . . . . . . . 40
3.4 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 40
3.5 PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 40
3.6 NO CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . . 40
3.7 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . 40
3.8 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 41
3.9 ACCURACY OF INFORMATION . . . . . . . . . . . . . . . . . . . 41
3.10 AVAILABILITY OF PURCHASE PRICE. . . . . . . . . . . . . . . . 41
ARTICLE 4 DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . 41
4.1 DUE DILIGENCE CONDITIONS PRECEDENT. . . . . . . . . . . . . . 41
(a) PHYSICAL CONDITION OF THE PROPERTY. . . . . . . . . . . 41
(b) RENT ROLL . . . . . . . . . . . . . . . . . . . . . . . 42
(c) LEASE REVIEW. . . . . . . . . . . . . . . . . . . . . . 42
(d) BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) CURRENT PRELIMINARY TITLE REPORTS . . . . . . . . . . . 42
(f) TITLE POLICIES. . . . . . . . . . . . . . . . . . . . . 42
(g) PROJECT PLANS . . . . . . . . . . . . . . . . . . . . . 42
(h) SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . 42
(i) TENANT'S ESTOPPEL CERTIFICATES. . . . . . . . . . . . . 42
(j) LESSOR'S ESTOPPEL CERTIFICATES. . . . . . . . . . . . . 43
(k) RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . 43
(l) COLLECTIVE BARGAINING AGREEMENTS. . . . . . . . . . . . 43
(m) EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . 43
(n) OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . 43
(o) UNEXPIRED CONCESSIONS . . . . . . . . . . . . . . . . . 44
(p) ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . 44
(q) ESTIMATED CLOSING BALANCE SHEET . . . . . . . . . . . . 44
(r) SUPPLEMENTAL DISCLOSURE SCHEDULE. . . . . . . . . . . . 44
4.2 SELLER'S ACKNOWLEDGMENT . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5 COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY AND ITS
SUBSIDIARIES PRIOR TO CLOSING AND CERTAIN OTHER MATTERS . . . 44
5.1 ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) GENERALLY . . . . . . . . . . . . . . . . . . . . . . . 44
(i) PHYSICAL ACCESS. . . . . . . . . . . . . . . . . 45
(ii) INTERVIEWS . . . . . . . . . . . . . . . . . . . 45
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(b) SPECIFIC AUTHORIZATION. . . . . . . . . . . . . . . . . 45
(c) FINANCIAL ACCESS. . . . . . . . . . . . . . . . . . . . 45
5.2 NOTICE OF BOARD MEETINGS. . . . . . . . . . . . . . . . . . . 45
5.3 SPECIFIC DELIVERIES . . . . . . . . . . . . . . . . . . . . . 46
(a) ESTIMATED CLOSING BALANCE SHEET . . . . . . . . . . . . 46
(b) CHARTER DOCUMENTS . . . . . . . . . . . . . . . . . . . 46
(c) MINUTE BOOKS. . . . . . . . . . . . . . . . . . . . . . 46
(d) STOCK RECORD BOOKS. . . . . . . . . . . . . . . . . . . 46
(e) TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . 46
(f) SUBSIDIARIES' FINANCIAL STATEMENTS. . . . . . . . . . . 46
(g) MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . 46
(h) ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . 46
(i) INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . 47
(j) CERTIFIED RENT ROLL . . . . . . . . . . . . . . . . . . 47
(k) LEASES. . . . . . . . . . . . . . . . . . . . . . . . . 47
(l) LEASE GUARANTIES. . . . . . . . . . . . . . . . . . . . 47
(m) TENANT CORRESPONDENCE . . . . . . . . . . . . . . . . . 47
(n) TENANT FINANCIAL STATEMENTS . . . . . . . . . . . . . . 47
(o) BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . 47
(p) TITLE REPORTS . . . . . . . . . . . . . . . . . . . . . 47
(q) TITLE POLICIES. . . . . . . . . . . . . . . . . . . . . 47
(r) PROJECT PLANS . . . . . . . . . . . . . . . . . . . . . 47
(s) [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . 47
(t) TENANT'S ESTOPPEL CERTIFICATES. . . . . . . . . . . . . 47
(u) LESSOR'S ESTOPPEL CERTIFICATES. . . . . . . . . . . . . 47
(v) CERTIFICATES OF OCCUPANCY . . . . . . . . . . . . . . . 47
(w) WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 47
(x) SUPPLEMENTAL SELLER'S DISCLOSURE SCHEDULE . . . . . . . 48
(y) OTHER REQUESTS. . . . . . . . . . . . . . . . . . . . . 48
5.4 MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS . . . 48
(a) NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) DELIVERY OF REPORTS . . . . . . . . . . . . . . . . . . 48
5.5 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 48
5.6 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . 50
5.7 PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 51
5.8 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE. . . . . . . . 51
5.9 GOVERNMENT FILINGS. . . . . . . . . . . . . . . . . . . . . . 51
(a) ALL PERMITS TO BE OBTAINED. . . . . . . . . . . . . . . 51
(b) XXXX-XXXXX-XXXXXX ACT . . . . . . . . . . . . . . . . . 51
(i) NO FILING NECESSARY. . . . . . . . . . . . . . . 51
(ii) PRE-MERGER NOTIFICATION FILINGS. . . . . . . . . 52
5.10 INTERCOMPANY AND AFFILIATE LIABILITIES. . . . . . . . . . . . 52
(a) NO RECENT CONTRIBUTIONS . . . . . . . . . . . . . . . . 52
(b) NO RECENT CANCELLATIONS . . . . . . . . . . . . . . . . 52
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5.11 TERMINATION/RETENTION OF EMPLOYEES; WARN ACT. . . . . . . . . 52
(a) RETENTION OF KEY EXECUTIVES; EMPLOYMENT AGREEMENTS. . . 52
(b) COSTS OF TRANSITION TO THIRD-PARTY LESSEES. . . . . . . 53
(c) WARN ACT NOTICES. . . . . . . . . . . . . . . . . . . . 54
ARTICLE 6 ADDITIONAL CONTINUING COVENANTS . . . . . . . . . . . . . . . 54
6.1 NONDISCLOSURE OF PROPRIETARY DATA . . . . . . . . . . . . . . 54
6.2 FEDERAL SECURITIES LAW DISCLOSURE COOPERATION . . . . . . . . 54
6.3 TAX COOPERATION . . . . . . . . . . . . . . . . . . . . . . . 55
6.4 REPRESENTATIVE. . . . . . . . . . . . . . . . . . . . . . . . 55
6.5 RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(a) AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 56
(b) WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . 56
6.6 AGREEMENT TO CONVEY RIGHTS TO THE NAME "XXXXXX'X. . . . . . . 56
ARTICLE 7 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . 56
7.1 GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . 56
(a) NO ORDERS; LEGAL PROCEEDINGS. . . . . . . . . . . . . . 56
(b) APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 57
(c) RESOLUTION OF ALL OPEN ISSUES . . . . . . . . . . . . . 57
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. . . . . . . . . . . . . . 57
(a) TENDER OF ALL STOCK . . . . . . . . . . . . . . . . . . 57
(b) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF
SELLER. . . . . . . . . . . . . . . . . . . . . . . . . 57
(c) NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . 57
(d) DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . 58
(e) NO DISPUTES BETWEEN SELLING STOCKHOLDERS. . . . . . . . 58
(f) OPINION OF COUNSEL TO THE COMPANY . . . . . . . . . . . 58
(g) CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . 58
(h) XXXX-XXXXX-XXXXXX ACT . . . . . . . . . . . . . . . . . 58
(i) HSR COMPLIANCE . . . . . . . . . . . . . . . . . 58
(ii) FTC APPROVAL MATTERS . . . . . . . . . . . . . . 58
(1) FTC NO-ACTION LETTER. . . . . . . . . . . . 58
(2) FTC APPROVAL LETTER . . . . . . . . . . . . 58
(3) EXTENSION LETTER. . . . . . . . . . . . . . 58
(4) NO FTC LETTER . . . . . . . . . . . . . . . 59
(iii) ANTITRUST DIVISION APPROVAL. . . . . . . . . . . 59
(1) GRANT OF EARLY TERMINATION REQUEST. . . . . 59
(2) NO OBJECTION LETTER . . . . . . . . . . . . 59
(3) EXTENSION LETTER. . . . . . . . . . . . . . 59
(4) NO ANTITRUST DIVISION LETTER. . . . . . . . 59
(i) CLOSING BALANCE SHEET . . . . . . . . . . . . . . . . . 59
(j) COMFORT LETTER. . . . . . . . . . . . . . . . . . . . . 59
(k) NO UNRESOLVED OBJECTION FROM BUYER'S ACCOUNTANTS. . . . 59
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(l) RESIGNATION OF DIRECTORS AND CERTAIN OFFICERS AND
TERMINATION OF EMPLOYEES. . . . . . . . . . . . . . . . 60
(m) EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . 60
(n) LEASES . . . . . . . . . . . . . . . . . . . . . . . . 60
(o) NO REGULATORY CHANGES . . . . . . . . . . . . . . . . . 60
(p) INVESTOR SUITABILITY QUESTIONNAIRE. . . . . . . . . . . 60
(q) ABILITY TO CONDUCT AUDITS REQUIRED BY FEDERAL
SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . 60
(r) ENVIRONMENTAL RESERVE . . . . . . . . . . . . . . . . . 61
(s) SUPPLEMENTAL DISCLOSURE SCHEDULE. . . . . . . . . . . . 61
7.3 CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . 61
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER
AND WESTERN . . . . . . . . . . . . . . . . . . . . . . 61
(b) OPINION OF COUNSEL TO WESTERN AND BUYER . . . . . . . . 61
(c) CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . 61
(d) ENVIRONMENTAL RESERVE . . . . . . . . . . . . . . . . . 62
ARTICLE 8 TERMINATION OF OBLIGATIONS; SURVIVAL. . . . . . . . . . . . . 62
8.1 TERMINATION UPON FAILURE OF DUE DILIGENCE CONDITIONS
PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(a) LACK OF APPROVAL BY BUYER . . . . . . . . . . . . . . . 62
(b) WRITTEN DISAPPROVAL BY BUYER. . . . . . . . . . . . . . 62
8.2 OTHER GROUNDS FOR TERMINATION . . . . . . . . . . . . . . . . 62
(a) MUTUAL CONSENT. . . . . . . . . . . . . . . . . . . . . 63
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET . . . . . . . 63
(c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. . . . . . . 63
(d) INACCURATE INFORMATION FROM SELLER OR THE COMPANY . . . 63
(e) INACCURATE INFORMATION FROM BUYER OR WESTERN. . . . . . 63
(f) MATERIAL BREACH . . . . . . . . . . . . . . . . . . . . 63
(g) FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . 63
8.3 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 64
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 64
8.5 ENFORCEABILITY OF REPRESENTATIONS AND WARRANTIES AGAINST
SELLER BY CERTAIN THIRD-PARTIES . . . . . . . . . . . . . . . 64
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . 65
9.2 OBLIGATIONS OF BUYER. . . . . . . . . . . . . . . . . . . . . 65
9.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.4 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(a) NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 65
(b) DEFENSE . . . . . . . . . . . . . . . . . . . . . . . . 65
(c) TAX ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . 66
(d) INSURANCE MATTERS . . . . . . . . . . . . . . . . . . . 67
9.5 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
vii
TABLE OF CONTENTS (CONT'D)
PAGE
----
9.6 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.7 NOT EXCLUSIVE REMEDY . . . . . . . . . . . . . . . . . . . . 67
9.8 CERTAIN OFFSET PROHIBITED . . . . . . . . . . . . . . . . . . 67
9.9 SELLING STOCKHOLDERS' PROPORTIONATE LIABILITY . . . . . . . . 68
9.10 LIMITATION ON OBLIGATIONS . . . . . . . . . . . . . . . . . . 68
(a) DE MINIMIS THRESHOLDS . . . . . . . . . . . . . . . . . 68
(b) LIABILITY CAP; SEVERAL AND NOT JOINT. . . . . . . . . . 68
9.11 LIMITATION ON OBLIGATIONS OF THE COMPANY. . . . . . . . . . . 68
ARTICLE 10 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . 69
10.2 SCHEDULES; EXHIBITS; INTEGRATION. . . . . . . . . . . . . . . 69
10.3 BEST EFFORTS; FURTHER ASSURANCES. . . . . . . . . . . . . . . 69
(a) STANDARD. . . . . . . . . . . . . . . . . . . . . . . . 69
(b) LIMITATION. . . . . . . . . . . . . . . . . . . . . . . 69
10.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 69
(a) CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . 69
(b) CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . 70
10.5 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 70
10.6 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.7 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 70
10.8 PUBLICITY AND REPORTS . . . . . . . . . . . . . . . . . . . . 70
10.9 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . 70
10.10 INVESTMENT REPRESENTATION . . . . . . . . . . . . . . . . . . 71
10.11 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . 71
10.12 PERFORMANCE BY SUBSIDIARIES . . . . . . . . . . . . . . . . . 71
10.13 WESTERN GUARANTY. . . . . . . . . . . . . . . . . . . . . . . 71
10.14 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.15 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.16 REMEDIES; WAIVER. . . . . . . . . . . . . . . . . . . . . . . 73
10.17 ATTORNEY'S FEES . . . . . . . . . . . . . . . . . . . . . . . 73
10.18 KNOWLEDGE CONVENTION. . . . . . . . . . . . . . . . . . . . . 74
10.19 REPRESENTATION BY COUNSEL; INTERPRETATION . . . . . . . . . . 74
10.20 SPECIFIC PERFORMANCE. . . . . . . . . . . . . . . . . . . . . 74
10.21 SEVERABILITY 74
10.22 NO CONSEQUENTIAL DAMAGES. . . . . . . . . . . . . . . . . . . 74
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
ACKNOWLEDGEMENT OF SELLER
SPOUSAL CONSENT
viii
SCHEDULES
SCHEDULE 1.0 Selling Stockholders
SCHEDULE 1.4 Estimated Closing Balance Sheet
SCHEDULE 2.0 Seller's Disclosure Schedule
SCHEDULE 2.1 Certain Information Regarding the Company and Subsidiaries
SCHEDULE 2.2 Company's Equity Interests in Non-Subsidiaries
SCHEDULE 2.4 Certain Liabilities Not Reflected in Most Recent Balance
Sheet
SCHEDULE 2.5 Certain Tax Information
SCHEDULE 2.6 Certain Material Contracts
SCHEDULE 2.7(a)(i) Land Owned in Fee Simple by Company and Subsidiaries
SCHEDULE 2.7(a)(iii) Improvements
SCHEDULE 2.7(a)(iv) Leaseholds
SCHEDULE 2.7(a)(v) Rent Roll
SCHEDULE 2.7(a)(vi) Certain Personal Property
SCHEDULE 2.7(b) Excluded Assets
SCHEDULE 2.7(c) Compliance With Laws
SCHEDULE 2.7(d) Defects
SCHEDULE 2.7(g) Development Obligations
SCHEDULE 2.7(k) List of Environmental Reports
SCHEDULE 2.8 Intangible Property
SCHEDULE 2.9 Permits and Approvals
SCHEDULE 2.10 Certain Orders, Actions and Labor Matters
SCHEDULE 2.13 Insurance Policies, Bonds, Premiums and Coverage Dates
SCHEDULE 2.17 Employee Benefit Plans
SCHEDULE 2.19 Intercompany Transactions
SCHEDULE 2.20 Financial Accounts; Persons with Signature Authority or
Other Access; Summary of Terms
SCHEDULE 2.24 Aging List of All Receivables of Company and Subsidiaries
SCHEDULE 2.25 Certain Information Regarding Suppliers
SCHEDULE 3.0 Buyer's Disclosure Schedule
SCHEDULE 5.10 Contributions of Assets and Cancellations of Intercompany
Loans or Extensions of Credit
EXHIBITS
EXHIBIT A Form of DownREIT Investor Suitability Questionnaire
EXHIBIT B Form of DownREIT Partnership Agreement
EXHIBIT C Form of Opinion of Counsel to Seller
EXHIBIT D Substance of Letter of Independent Accountants
EXHIBIT E Surveyor's Certification and Specifications
EXHIBIT F Form of Tenant's Estoppel Certificate
EXHIBIT G Form of Certificate
EXHIBIT H Form of Opinion of Buyer's Counsel
EXHIBIT I Substance of Closing Balance Sheet Letter of Independent
Accountants
EXHIBIT J Substance of Rule 3-14 Audit Representation Letter
ix
STOCK PURCHASE AND CONTRIBUTION AGREEMENT
THIS STOCK PURCHASE AND CONTRIBUTION AGREEMENT is entered into as of
September 29, 1998, by and among (i) Western Investment Real Estate Trust, a
California trust ("Western") that has elected to be taxed as a real estate
investment trust under the Code, (ii) Western Real Estate Services, Inc., a
California corporation ("Buyer"), (iii) Xxxxxx'x Food Stores, Inc., an Oregon
corporation (the "Company"), and (iv) each of the persons or entities listed in
SCHEDULE 1.0 to this Agreement (each a "Selling Stockholder" and collectively
"Seller").
THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts,
understandings and intentions:
A. Seller owns all of the issued and outstanding capital stock of
the Company; and
B. Seller desires to sell, and Buyer desires to buy, all of the
issued and outstanding capital stock of the Company for the consideration set
forth in this Agreement and on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises
of the parties, the parties to this Agreement agree as follows:
ARTICLE 1
DEFINITIONS; PURCHASE AND SALE; CLOSING
1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article 1 have the meanings assigned
to them in this Article 1 and include the plural as well as the singular;
(b) all accounting terms not otherwise defined in this Agreement
have the meanings assigned under generally accepted accounting principles;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement;
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms; and
(e) the words "herein," "hereof," "hereby" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Accountants" means XxXxx White Xxxxxxxx & Xxxx LLP, independent
certified public accountants to the Company.
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Adjustment Factor" has the meaning set forth in Section 1.4(iii).
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"Agreement" means this Stock Purchase and Contribution Agreement by
and among Buyer, Western, the Company and Seller, as amended or supplemented in
a writing signed by all of the parties to this Agreement, together with all
Exhibits and Schedules attached or incorporated by reference.
"Antitrust Division Extension Letter" has the meaning set forth in
Section 7.2(h)(iii)(3).
"Antitrust Division No-Objection Letter" has the meaning set forth in
Section 7.2(h)(iii)(2).
"Approval" means any approval, authorization, consent, qualification
or registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"Appurtenant Rights" has the meaning set forth in Section 2.7(a)(x).
"Associate" of a Person means
(i) a corporation or organization (other than the Company or
a party to this Agreement) of which such person is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities;
(ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar capacity; and
(iii) any relative or spouse of such person or any relative of
such spouse.
2
"Business" means the business of the Company or any Subsidiary, and
shall be deemed to include any of the following incidents of such business:
income, cash flow, operations, condition (financial or other), assets and
properties, anticipated revenues and income, prospects, liabilities, and
personnel and management.
"Buyer" has the meaning set forth in the introductory paragraph.
"Buyer's Accountants" means the accountants and auditors, both
internal staff and one or more external firms, retained by Buyer from time to
time in its sole discretion.
"Buyer's Disclosure Schedule" has the meaning set forth in the
introductory paragraph to Article 3.
"Buyer's Pre-Merger Notice" has the meaning set forth in Section
5.9(b)(ii).
"Certificates of Occupancy" has the meaning set forth in Section
4.1(m).
"Certified Rent Roll" has the meaning set forth in Section 4.1(b).
"Closing" means the consummation of the purchase and sale of the Stock
under this Agreement.
"Closing Balance Sheet" has the meaning set forth in Section
1.4(b)(i).
"Closing Date" has the meaning set forth in Section 1.8.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" has the meaning set forth in Section 6.2.
"Common Stock" shall mean the Company's common stock, no par value.
"Company" has the meaning set forth in the introductory paragraph.
"Completed Development Obligations" has the meaning set forth in
Section 2.7(g).
"Continuing Development Obligations" has the meaning set forth in
Section 2.7(g).
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Contract Rights" has the meaning set forth in Section 2.7(a)(viii).
"Cure Period" has the meaning set forth in Section 8.1(a).
"Deposits" has the meaning set forth in Section 1.6(a).
3
"Disclosure Schedule" means the Buyer's Disclosure Schedule or the
Seller's Disclosure Schedule, as the case may be. The Sections of each
Disclosure Schedule shall be numbered to correspond to the applicable Section of
this Agreement and, together with all matters under such heading, shall be
deemed to qualify ONLY that section.
"DownREIT" means a limited partnership which Buyer or an Affiliate of
Buyer may form pursuant to Section 1.5.
"DownREIT Election" has the meaning set forth in Section 1.5(a).
"DownREIT Unit" means a unit of limited partnership interest in the
DownREIT.
"Due Diligence Period" has its meaning set forth in Section 1.7.
"Due Diligence Condition Precedent" has the meaning set forth in Section 4.1.
"Electing Stockholder" has the meaning set forth in Section 1.5(a).
"Employee Pension Benefit Plan" has the meaning set forth in Section
2.17(6)(b)(1), including, without limitation, all Plans listed in Schedule
2.17(b).
"Employee Retention Letter" has the meaning set forth in Section
5.11(a).
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Equity Securities" means any capital stock or other equity interest
or any securities convertible into or exchangeable for capital stock or any
other rights, warrants or options to acquire any of the foregoing securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"ERISA Affiliate" has the meaning set forth in Section 2.17(c)(2).
"Estate" has its meaning set forth in Section 2.3(c)(ii).
"Escrow Agent" has the meaning set forth in Section 1.6(a).
"Estimated Closing Balance Sheet" has the meaning set forth in Section
1.4(b)(v).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 2.7(b).
4
"Fair Market Value of one Western Common Share" has the meaning set
forth in Section 1.5(a).
"Final Closing Balance Sheet" has the meaning set forth in Section
1.4(b)(iv).
"First Deposit Date" has its meaning set forth in Section 1.6(a).
"FTC Approval Letter" has its meaning set forth in Section
7.2(h)(ii)(2).
"FTC Extension Letter" has its meaning set forth in Section
7.2(h)(ii)(3).
"FTC No Action Letter" has its meaning set forth in Section
7.2(h)(ii)(1).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign, including, without limitation, the United States Senate and
House of Representatives and committees and subcommittees thereof.
"Grant of Early Termination Request" has its meaning set forth in
Section 7.2(h)(iii)(1).
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"Hazardous Substance" means substances that are defined or listed in,
or otherwise classified pursuant to, any applicable Laws as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances," or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
radioactivity, carcinogenicity, reproductive toxicity or "EP toxicity," and
petroleum and drilling fluids, produced waters and other wastes associated with
the exploration, development, or production of crude oil, natural gas or
geothermal energy.
"HSR Compliance" has the meaning set forth in Section 7.2(h)(i).
"Improvements" has the meaning set forth in Section 2.7(a)(iii).
"Indemnifiable Claim" means any Loss for or against which any party is
entitled to indemnification under this Agreement; "Indemnified Party" means the
party entitled to indemnity hereunder; and "Indemnifying Party" means the party
obligated to provide indemnification hereunder.
"Indemnifying Party" has the meaning set forth in Section 9.4(a).
5
"Intangible Property" means any trade secret, secret process or other
confidential information or know-how and any and all Marks, Permits, goodwill,
business information, technologies, methods, formulations, databases,
inventions, customer lists and files and advertising and marketing programs and
plans..
"IRS" means the Internal Revenue Service or any successor entity.
"Labor Matters" has the meaning set forth in Section 2.10.
"Land" has the meaning set forth in Section 2.7(a)(i).
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"Leaseholds" has the meaning set forth in Section 2.7(a)(iv).
"Leases" has the meaning set forth in Section 2.7(a)(v).
"Lessor's Estoppel Certificates" has the meaning set forth in Section
4.1(j).
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including, but not limited to, actual interest or other carrying costs,
penalties, legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
the specified person.
"Xxxx" means any brand name, copyright, patent, service xxxx,
trademark, tradename, and all registrations or application for registration of
any of the foregoing.
"Material Adverse Change" has the meaning set forth in Section 2.4(c).
"Material Contract" means any Contract material to the Business of the
subject person as of or after the date of this Agreement and includes, but is
not limited to, those contracts deemed material by Section 2.6.
"Material Defects" has the meaning set forth in Section 2.7(d).
"Net Tax Benefit" has the meaning set forth in Section 9.4(c)(ii).
"No Antitrust Division Letter" has the meaning set forth in Section
7.2(h)(iii)(4).
"No FTC Letter" has the meaning set forth in Section 7.2(h)(ii)(4).
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Parking Facilities" has the meaning set forth in Section 2.7(a)(ii).
6
"Partnership Agreement" has the meaning set forth in Section 1.5(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Permitted Exceptions" has the meaning set forth in 1.4(b).
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Personal Property" has the meaning set forth in Section 2.7(a)(vi).
"Plans" has the meaning set forth in Section 2.7(a)(vii).
"Pre-Redemption Purchase Price" has the meaning set forth in Section
1.4(a).
"Previous Accountants" means Ternberg & Xxxxxx LLP, independent
certified public accountants to the Company prior to the Company's engagement of
the Accountants.
"Project Plans" has the meaning set forth in Section 4.1(g).
"Property" has the meaning set forth in Section 2.7(a)(x).
"Purchase Price" has the meaning set forth in Section 1.4(a).
"Purchase Price Adjustment Fund" has the meaning set forth in
Section 1.4(d).
"Realty" has the meaning set forth in Section 2.7(a)(v).
"Redemption Payment" has the meaning set forth in Section 1.2.
"REIT" means a real estate investment trust under the Code.
"Releasees" has the meaning set forth in Section 6.5(a).
"Rent Roll" has the meaning set forth in Section 2.7(a)(v).
"Representative" has the meaning set forth in Section 6.4
"Rights" has the meaning set forth in Section 2.79(a)(ix).
"Scheduled Closing Date" has the meaning set forth in Section 1.6(a)
as may be modified by Section 8.1
"SEC" means the Securities and Exchange Commission or any successor
entity.
7
"Second Deposit Date" has its meaning set forth in Section 1.6(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the introductory paragraph.
"Seller's Disclosure Schedule" has the meaning set forth in the
introductory paragraph to Article 2.
"Seller's Pre-Merger Notice" has the meaning set forth in Section
5.9(b)(ii).
"Selling Stockholder" has the meaning set forth in the introductory
paragraph.
"Settlement Agreement" means that certain Settlement Agreement among
the Company and its shareholders dated as of December 15, 1997, as the same may
be amended from time to time; PROVIDED, HOWEVER, that any amendment that would
materially disadvantage Buyer, Western or the Company shall not become effective
until approved by Buyer or Western, which approval shall not be unreasonably
withheld.
"Soils Reports" has the meaning set forth in Section 4.1(a).
"Standard Lease Forms" has the meaning set forth in Section 4.1(c).
"Store" means any grocery store operated by the Company.
"Stock" means all of the outstanding capital stock of the Company.
"Subsidiary" means any Person in which the Company has a direct or
indirect equity or ownership interest in excess of 50%, including, without
limitation, the Persons listed on SCHEDULE 2.1 to this Agreement.
"Supplemental Disclosure Schedule" has the meaning set forth in
Section 5.3(x).
"Survey" has the meaning set forth in Section 4.1(h).
"Tax" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information required to
be supplied to a Governmental Entity with respect to Taxes, including, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Company or any Subsidiary.
"Tenant" means any lessee under any Tenant Lease.
8
"Tenant Correspondence" has the meaning set forth in Section 4.1(c).
"Tenant Lease" has the meaning set forth in Section 2.7(a)(v).
"Tenant's Estoppel Certificates" has the meaning set forth in Section
4.1(i).
"Tenant Financial Statements" has the meaning set forth in Section
4.1(c).
"Third Deposit Date" has its meaning set forth in Section 1.6(a).
"Title Policies" has the meaning set forth in Section 4.1(f).
"Title Report" has the meaning set forth in Section 4.1(e).
"Transferee" has the meaning set forth in Section 8.5.
"Transition Option" has the meaning set forth in Section 5.11(b).
"WARN Act" has the meaning set forth in Section 2.31.
"Warranties" has the meaning set forth in Section 4.1(m).
"Western" has the meaning set forth in the introductory paragraph.
"Western Common Share" means a common share of beneficial interest, no
par value, of Western.
1.2 REDEMPTION OF SHARES OF STOCK PRIOR TO THE CLOSING. If
requested by Buyer no later than 20 days prior to the Scheduled Closing Date,
the Company shall (a) borrow, from one or more lenders selected by Buyer (which
lenders may include one or more of Buyer or Western) and under terms and
conditions negotiated between Buyer and such lenders and reasonably acceptable
to the Company (including, without limitation, that the loan be long-term, E.G.,
10-year term, nonrecourse and secured solely by the Company's historic real
estate assets), such amount as Buyer specifies and (b) use such borrowed funds
to redeem, for cash, immediately prior to the Closing, the Stock owned by some
or all of the Selling Stockholders who are not Electing Stockholders (as defined
below). Any such redemption shall be non-pro rata and otherwise effected in a
manner that does not result in the redemption payment being considered a
dividend under the Code. Any such redemption shall occur immediately prior to
the Closing and if any shares of Stock are so redeemed, they shall be redeemed
at a price per share equal to the Pre-Redemption Purchase Price (as defined
below) divided by the total number of shares of Stock outstanding on such date,
and from and after the time of such redemption the term "Stock" shall be deemed
to refer to the shares of the Company's Common Stock that remain outstanding
following such redemption. The cash paid by the Company for each such
redemption is referred to in this Agreement as a "Redemption Payment." The
aggregate amount of the Redemption Payments shall be allocated among the Selling
Stockholders pursuant to the formula set forth in Section 4 of the Settlement
Agreement. In the event that the purchase of the Stock by Buyer (or its
assignee) does not occur for any reason, Buyer shall indemnify the Company, on
an after-tax basis, for any expenses (including pre-payment fees) reasonably and
actually incurred by the
9
Company in arranging such borrowing, PROVIDED that the incurrence of such
expenses was approved by Buyer in writing in advance.
1.3 TRANSFER OF STOCK BY SELLER. Subject to the terms and
conditions of this Agreement, Seller agrees to sell the Stock and deliver the
certificates evidencing the Stock to Buyer at the Closing. The certificates
will be properly endorsed for transfer to or accompanied by a duly executed
stock power in favor of Buyer or its nominee (as Buyer may have directed prior
to the Closing Date) and otherwise in a form acceptable for transfer on the
books of the Company. Seller will pay any Taxes payable with respect to the
transfer of the Stock.
1.4 PURCHASE OF THE STOCK BY BUYER.
(a) PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, Buyer agrees to acquire the Stock from Seller and to pay an aggregate
amount equal to (i) Fifty-Four Million, Eight Hundred Forty-One Thousand, Eight
Hundred Thirty Dollars ($54,841,830), PLUS (ii) the Adjustment Factor, as
defined below (such sum being the "Pre-Redemption Purchase Price"), MINUS (iii)
the total Redemption Payments paid by the Company, if any, through the Closing
Date (as so calculated, the "Purchase Price"). The Purchase Price shall be paid
in cash and/or in DownREIT Units (as provided in Section 1.5) at the Closing;
PROVIDED, HOWEVER, that the Deposits (as defined below) shall be credited
against the cash portion of the Purchase Price at the Closing; and PROVIDED,
FURTHER, that amounts payable for United Grocers stock shall be deferred
pursuant to Section 1.4(b)(ii)(6) below and shall be paid in cash (except as set
forth in Section 1.4(b)(ii)(6)).
(b) ADJUSTMENT.
(i) CLOSING BALANCE SHEET. Within five (5) business days
prior to the Closing Date, the Company shall prepare a purchase balance
sheet (the "Closing Balance Sheet"), including, without limitation, the
line items set forth in the example balance sheet attached as SCHEDULE 1.4,
which shall accurately describe the Company's assets and liabilities as of
the date that precedes the Closing Date by as short a time as is
practicable for such task, but in no event more than five (5) days prior to
the Closing Date; PROVIDED, HOWEVER, that the Closing Balance Sheet shall
treat the Excluded Assets as though they were owned by the Company and
shall exclude any debt incurred under Section 1.2 to fund Redemption
Payments, and PROVIDED, FURTHER, that there shall be no change to the line
items "Real Estate," "Blue Sky Money," and "Furniture, Fixtures Equipment
and Leaseholds" from the amounts included in SCHEDULE 1.4 (the "Permitted
Exceptions"). The Closing Balance Sheet shall value each non-cash line
item asset as described in subparagraph (b)(ii) below and otherwise at fair
market value. The Closing Balance Sheet shall be approved in writing by
the Representative and accompanied by a report to Buyer executed by the
Accountants describing agreed-upon procedures performed and to the effect
set forth in EXHIBIT I.
(ii) LINE ITEM VALUATION.
(1) INVENTORY. Within ten (10) business days prior to
the Closing Date and again on the Closing Date, the "Inventory" line
item shall be updated by the Company based upon cost and a physical
count on the foregoing dates
10
counted at retail and costed using one hundred percent (100%) minus
the last 12-month average individual store gross margins (which
reflect shrinkage and ad markdown), which (by way of example) for the
twelve (12) months ended May 31, 1998 was approximately 26.8%.
(2) ACCOUNTS RECEIVABLE shall be valued at net book
value (I.E., gross book value less appropriate loss reserves).
(3) ACCRUED INTEREST RECEIVABLE shall be valued at book
value in accordance with GAAP.
(4) PREPAID EXPENSES shall be valued at book value.
(5) DEFERRED CHARGES, NET shall be valued at book value
in accordance with GAAP.
(6) UNITED GROCERS STOCK shall be valued at book value,
but the portion of the Purchase Price attributable to such stock shall
not be payable to Seller until such stock is redeemed or purchased by
United Grocers, or otherwise disposed of. The Representative shall
have exclusive authority to control the disposition of such stock
(including the timing of the disposition) and Buyer shall cooperate in
such process; PROVIDED, HOWEVER, that until September 1, 1999, the
Representative may not cause such stock to be sold if such sale would
result in the Company not being supplied by United Grocers during any
time when Company intends to be operating the Stores. If the Company
has not disposed of the United Grocers stock because of continued
operations by that time (or any extension thereof agreed to by the
Representative and Buyer), Buyer shall cause the Company to pay the
fair market value of the stock to Seller, allocated among the Selling
Stockholders as the Representative shall direct. All proceeds of such
disposition in the form received (I.E., whether as cash or non-cash
consideration such as a note) (after adjustment for reasonable
expenses and income taxes incurred by the Company or Buyer in
connection with such disposition, if any), whether less than or
greater than the book value of such stock, shall be distributed by
Company or Buyer to the Selling Stockholders allocated among them as
the Representative directs, and neither Buyer, Western nor Company
shall be liable for any shortfall. Buyer agrees to cause the United
Grocers stock to be held, unencumbered, until the Representative so
disposes of it.
(7) NOTES RECEIVABLE shall be valued at book value
(gross book value less appropriate loss reserves).
(8) FURNITURE, FIXTURE, EQUIPMENT AND LEASEHOLD shall be
valued at Six Hundred Thirty Thousand Dollars ($630,000).
(9) ENVIRONMENTAL RESERVE shall be valued as follows.
No later than seven (7) days prior to the Closing Date, Company and
Western shall each obtain, from environmental engineering firms
mutually acceptable to the Company and Western, bids for the estimated
cost of Phase III remediation of
11
the subsurface contamination reported in any Phase II environmental
audit obtained by Western before the end of the Due Diligence Period.
Two hundred percent (200%) of the mean average of such estimates shall
appear as the "Environmental Reserve" on the preliminary Closing
Balance Sheet, PROVIDED that such average estimate is no greater than
One Hundred Thousand Dollars ($100,000). If such average estimate is
greater than One Hundred Thousand Dollars ($100,000), Company and
Buyer shall meet pre-Closing to negotiate the Environmental Reserve
line item, and the number upon which they agree, if any, shall appear
as the "Environmental Reserve" on the preliminary Closing Balance
Sheet. It shall be a condition to the obligations of Buyer (as more
fully described in Section 7.2(r)) that such agreement, if necessary
under this paragraph, is reached or waived by Buyer. As provided in
Section 1.6(b), upon the failure of such closing condition, any
Deposits would be refunded in full to Buyer with interest.
Alternately, if such agreement is not reached, Buyer may elect for the
Environmental Reserve line item to be Two Hundred Thousand Dollars
($200,000), which election shall be deemed a waiver of the Closing
condition set forth in Section 7.2(r).
(10) SEVERANCE shall include, without limitation, (A)
all severance and profit sharing payments under the Company's
retention plan and (B) all costs of the transition to third-party
lessees for which the Company is responsible pursuant to Section 5.11,
as a pre-Closing expense.
(11) CLOSING COSTS shall include, without limitation,
the fees of Macadam Capital Partners and Company counsel relating to
the transactions contemplated by this Agreement.
(12) TAXES shall include, without limitation, the items
referred to in Section 2.30(a).
(iii) ADJUSTMENT FACTOR. The term "Adjustment Factor" shall
mean the amount by which the Purchase Price in the updated Closing Balance
Sheet exceeds Fifty-Four Million, Eight Hundred Forty-One Thousand, Eight
Hundred Thirty Dollars ($54,841,830) (and if less than such figure, the
Adjustment Factor shall be a negative number).
(iv) FINAL CLOSING BALANCE SHEET; POST-CLOSING RECONCILIATION.
As soon as practicable, but in no event later than 365 days, after the
Closing Date, the Representative and Buyer together with their accountants
shall determine the final values as of the Closing Date for the line items
in the Closing Balance Sheet, other than the Permitted Exceptions (the
"Final Closing Balance Sheet"), pursuant to the calculation formulae
contained or referred to in this Section 1.4(b), and there shall be a
prompt payment (and in any case no later than the 366th day post-Closing)
of cash (or DownREIT Units as provided below) between Buyer and Seller as
appropriate to reconcile the Net Purchase Price shown on such Final Closing
Balance Sheet with the preliminary Closing Balance Sheet, plus interest (at
the rate actually earned on cash in the Purchase Price Adjustment Fund) on
such amount from the Closing Date. If a payment is required under this
paragraph from Seller to Buyer, the Selling Stockholders
12
shall be severally liable for such payment pro rata according to the extent
of their interests set forth in Section 4 of the Settlement Agreement, as
such allocation of liability is calculated by the Representative (as
defined herein), (such liability shall not be subject to the DE MINIMIS
basket described in Section 9.10(a)) and each Selling Stockholder shall
promptly pay such amount to Buyer, drawing first from the Purchase Price
Adjustment Fund established in Section 1.4(d) below. Payments from such
Fund shall be drawn from the cash and DownREIT Units each Selling
Stockholder contributed to the Fund and within each Selling Stockholder's
contribution, payments shall come first from cash. For purposes of valuing
payments in DownREIT Units, the value of each DownREIT Unit on the payment
date shall be deemed to be equal to the Fair Market Value of one Western
Common Share (as defined below) on such payment date. If a payment is
required under this paragraph from Buyer to Seller, Buyer shall promptly
pay such amount in cash, allocated among the Selling Stockholders as the
Representative shall direct.
The Final Closing Balance Sheet shall be prepared by the parties
according to the formulae applicable to the preliminary Closing Balance
Sheet (but applied as of the Closing Date) with the following exceptions:
(1) ENVIRONMENTAL RESERVE. Western shall undertake, or
cause a consultant to undertake, on behalf of the Company, to perform
the phase III environmental remediation of the contamination disclosed
in the Phase II environmental audits referred to in subsection
1.4(b)(ii)(9) above, and completion thereof shall be evidenced by a
"no further action" letter or similar letter issued by the applicable
state or federal agency. The Environmental Reserve line item on the
Final Closing Balance Sheet shall be the actual cost to the Company
(and/or Buyer, the DownREIT or Western, as applicable) of so
completing such Phase III remediation. To the extent that the
Environmental Reserve shown on the Final Closing Balance Sheet exceeds
the Environmental Reserve shown on the preliminary Closing Balance
Sheet, the difference shall be paid first from the Purchase Price
Adjustment Fund and, if such Fund is exhausted, the Selling
Stockholders shall remain severally liable for the deficit, with such
allocation among them as the Representative shall direct pursuant to
the Settlement Agreement; however, unlike other Final Closing Balance
Sheet reconciliations, such liability shall count towards (and shall
not exceed) Seller's liability cap, as more fully described in Section
9.10(b). The Selling Stockholders shall make any payments necessary,
as among themselves, so that the allocation of Purchase Price
Adjustment Fund payments properly reflects their agreed upon
allocation of liability for such payments. The Environmental Reserve
reconciliation payments shall not be subject to the DE MINIMIS basket
described in Section 9.10(a).
(2) ITEMS OPEN AFTER 365 DAYS. If any line item
required to be set forth in the Final Closing Balance Sheet cannot be
definitively valued within 365 days after the Closing, the parties'
best estimate of the unknown portion (the "Estimated Portion") of such
line items shall be added to the known portion (the "Known Portion")
and the sum shall be included on the Final Closing Balance Sheet and
after the reconciliation payment referred to above there shall be no
13
further reconciliation payments with respect to such line items;
PROVIDED, HOWEVER, that if Severance or Environmental Reserve cannot
be definitively valued on or before the 365th day, then the sum of the
Estimated Portion and the Known Portion of such line items shall
appear on the Final Closing Balance Sheet and, when each Estimated
Portion is susceptible of definitive valuation, there shall be
additional reconciliation payments between the parties as appropriate;
and PROVIDED, FURTHER, that the United Grocers Stock shall be treated
in accordance with Section 1.4(b)(ii)(6) above.
(v) PRE-CLOSING ESTIMATE. Pursuant to Section 5.3(a), the
Company shall deliver to Buyer no later than seven (7) days prior to the
First Deposit Date (as defined below) its best estimate of the values that
will appear on the Closing Balance Sheet (such estimate being the
"Estimated Closing Balance Sheet"), and shall update such estimate from
time to time during the Due Diligence Period as the facts change materially
or at Buyer's request.
(c) ALLOCATION. The purpose of the allocation provisions that
follow in this subsection (c) and subsection (d) immediately below is for the
total consideration ultimately received by the Selling Stockholders (including
the cash Purchase Price, the cash Redemption Payments, and the value of DownREIT
Units (but not including any cash distributions on the DownREIT Units)) to be
allocated among them according to the formula set forth in Section 4 of the
Settlement Agreement, and the provisions that follow shall be interpreted to
achieve such purpose. As between Buyer, Western and the DownREIT, on the one
hand, and the Selling Stockholders on the other, the Selling Stockholders,
acting through the Representative, shall calculate such allocation in good
faith. The cash portion of the Purchase Price shall be paid by Buyer by wire
transfer of same day federal funds to such accounts and with such allocation
between accounts as shall be specified by the Representative in a writing
delivered to Buyer a reasonable period of time prior to the Closing. In case of
any disagreement between the Selling Stockholders over the allocation so made by
the Representative, Buyer shall rely solely upon the Representative's written
instructions and shall be indemnified and held harmless from and against all
claims by any Selling Stockholder for misallocation of any portion of the
Purchase Price.
(d) PURCHASE PRICE ADJUSTMENT FUND. The Selling Stockholders agree
that the Representative shall allocate One Million Dollars ($1,000,000), in the
aggregate (of which $650,000 shall be cash and any portion of the remainder may
be DownREIT Units), of the Purchase Price to the Escrow Agent referred to in
Section 1.6 to be held in an interest bearing account and administered by the
Representative in accordance with this Agreement in order to pay any liability
of the Selling Stockholders under Section 1.4(b)(iv) (the "Purchase Price
Adjustment Fund") (which amount shall not be a limitation on Seller's liability
under Section 1.4(b)(iv) but merely a partial security for such liability). The
Selling Stockholders authorize the Representative to determine the amount of
each Selling Stockholder's contribution to the Purchase Price Adjustment Fund,
and to set the contribution using cash, DownREIT Units or a combination thereof.
Any distribution made by the DownREIT on DownREIT Units in the Fund shall be
retained in the Fund to the extent of interest accrued on deposits equal to the
initial value of such DownREIT Units, with any excess distributed to the owner
of the DownREIT Units. On the 367th day after the Closing, any cash and
DownREIT Units remaining in such escrow account shall be disbursed by the Escrow
Agent at the Representative's direction; except that 110% of any Estimated
Portions of the Severance and Environmental Reserve line items shall be retained
14
in escrow until the precise amounts are known and the appropriate reconciliation
payment is made, at which time all cash and DownREIT Units remaining in such
escrow account shall be disbursed by the Escrow Agent at the Representative's
direction. A Selling Stockholder who has deposited DownREIT Units to the Fund
may substitute cash for the DownREIT Units at any time, by depositing a sum
equal to the value of the DownREIT Units at the date the fund was established
plus the amount of interest (not previously paid into the Fund as a distribution
on the withdrawn DownREIT Unit) that would have accrued on such cash had it been
contributed to the Fund at the Closing. If, on the date that any disbursement
from the fund is made to Buyer or Western in DownREIT Units, the value of a
DownREIT Unit is less than the value of a DownREIT Unit on the date the Fund was
established, then the Selling Stockholder who contributed such DownREIT Unit
shall pay to the Fund the difference in cash (to be immediately paid out as part
of said disbursement to Buyer or Western). Any portion of the escrowed cash
and/or DownREIT Units may be released earlier upon Western's written consent,
which Western may give or withhold in its sole and absolute discretion, to be
disbursed among the Selling Stockholders as the Representative shall direct.
1.5 ELECTION TO RECEIVE DOWNREIT UNITS.
(a) DOWNREIT ELECTION. Each Selling Stockholder, in lieu of
receiving all or part of its share of the Purchase Price in cash, may elect to
receive a number of DownREIT Units equal in value on the Closing Date to all or
part of the cash otherwise payable under Section 1.4(c)(a "DownREIT Election"),
which amount shall be specified in the DownREIT Election. Each Selling
Stockholder that makes a DownREIT Election is referred to as an "Electing
Stockholder." For purposes of this Agreement only, the value of each DownREIT
Unit on the Closing Date shall be deemed to be equal to the Fair Market Value of
one Western Common Share on the Closing Date. The "Fair Market Value of one
Western Common Share" in reference to any given date shall mean the average
closing price of one Western Common Share on the American Stock Exchange as
reported in the Western Edition of the Wall Street Journal over the thirty (30)
trading days preceding such date during which the Western Common shares were
traded, adjusted for any cash dividend payable on such shares with an
ex-dividend date occurring during such period.
(b) ELECTION DEADLINE. Each DownREIT Election shall be made in
writing to Buyer no later than ten (10) business days after the delivery to
Macadam Capital Partners of a pro forma balance sheet and statement of cash
flows of the DownREIT; and each Electing Stockholder, by making such election,
thereby agrees to become a party to the partnership agreement of the DownREIT
(the "Partnership Agreement") as a limited partner at the Closing. If, by such
election deadline, the total DownREIT Elections are in respect of less than Five
Million Dollars ($5,000,000), all DownREIT Elections shall be deemed to have
been withdrawn.
(c) FORMATION OF DOWNREIT; CONTRIBUTION TO DOWNREIT. If any
Selling Stockholder elects to receive DownREIT Units pursuant to this Section
1.5 (and unless such election is validly withdrawn pursuant to subsection (f) of
this Section), (i) Western or an Affiliate of Western shall form the DownREIT
and serve as its sole general partner, (ii) Western shall contribute all of the
stock of Buyer held by Western to the DownREIT such that the DownREIT holds a
95% economic interest in Buyer, (iii) Western shall contribute to the DownREIT
certain assets to be agreed upon by Western and the Electing Stockholders in
writing (which agreement is made a condition to closing by Section 7.1(c)), (iv)
Buyer shall assign
15
Buyer's right to acquire shares of Stock of the Electing Stockholders to the
DownREIT (and the Company and the Selling Stockholders hereby consent to such
assignment), (v) each Electing Stockholder at the Closing shall contribute to
the DownREIT, in exchange for DownREIT Units, the number of shares of Stock
equal in value to the amount of foregone cash specified in such Electing
Stockholder's DownREIT Election, (vi) Western shall cause the DownREIT to accept
such shares of Stock on the Closing Date in exchange for DownREIT Units, and
(vii) Western and Buyer may, but shall not be required to, cause the DownREIT to
transfer the shares of Stock acquired by the DownREIT to Buyer and/or to merge
the Company with and into Buyer.
(d) ELECTING STOCKHOLDER'S INVESTMENT REPRESENTATION. Each Selling
Stockholder who makes a DownREIT Election shall be deemed to have represented
and warranted to Buyer that it is an "accredited investor" as defined in Rule
501 under the Securities Act and will acquire the DownREIT Units for its own
account for investment purposes only and not with a view to or for sale in
connection with a distribution thereof. At the Closing, each Electing
Stockholder shall deliver to the DownREIT a representation letter substantially
in the form of EXHIBIT A to this Agreement (Form of DownREIT Investor
Suitability Questionnaire).
(e) PARTNERSHIP AGREEMENT. The Partnership Agreement shall provide
that each DownREIT Unit shall entitle the holder thereof to receive
distributions from the DownREIT equivalent to distributions paid by Western on a
share of its beneficial interest. The Partnership Agreement shall further
provide that each DownREIT Unit shall be convertible by its holder beginning
twelve (12) months after the Closing Date for cash equal to the Fair Market
Value of one Western Common Share on the date of conversion, or, at the option
of Buyer, one Western Common Share. The Partnership Agreement shall prohibit a
sale of Stock contributed to the Partnership for a period of not less than ten
(10) years from the Closing Date, other than (i) pursuant to a transaction that
results in no material adverse tax consequences to the limited partners to the
Partnership Agreement or (ii) in cases where Western, in its sole discretion,
elects to indemnify the limited partners from such tax liability. The
Partnership Agreement shall be substantially in the form of EXHIBIT B to this
Agreement (Form of DownREIT Partnership Agreement).
(f) WITHDRAWAL OF DOWNREIT ELECTION. Except as may be explicitly
set forth in this Agreement, no DownREIT Election may be withdrawn without the
prior written consent of Buyer, which consent may be withheld in Buyer's sole
and absolute discretion; PROVIDED, HOWEVER, that any DownREIT Election may be
withdrawn in the event that Buyer assigns its rights under this Agreement to any
entity other than the DownREIT.
1.6 DEPOSITS.
(a) PAYMENT. On the date of this Agreement (the "First Deposit
Date"), Buyer shall deposit Four Hundred Seventy-Five Thousand Dollars
($475,000) into escrow in an interest-bearing account with First American Title
Insurance Company of Oregon, or with such other escrow agent as is mutually
acceptable to Buyer and Seller (the "Escrow Agent"). If this Agreement is not
terminated pursuant to Section 8 on or prior to September 30, 1998, Buyer shall
on September 30, 1998 (the "Second Deposit Date") deposit an additional Three
Hundred Seventy-Five Thousand Dollars ($375,000) into escrow with the Escrow
Agent. If this Agreement is not terminated pursuant to Section 8 on or prior to
October 15, 1998, Buyer shall on October 15, 1998 (the "Third Deposit Date")
deposit an additional One Hundred Thousand
16
Dollars ($100,000) into escrow with the Escrow Agent. Each of the payments
referred to above to the Escrow Agent, to the extent actually made, with
interest thereon, are referred to herein collectively as the "Deposits."
(b) REFUNDABILITY. The Deposits shall be refunded in full to Buyer
with interest if any of the following events occur: (i) Seller elects to
terminate this Agreement for any reason prior to the end of the Due Diligence
Period (or any Cure Period provided by Section 8.1); (ii) Seller elects to
terminate this Agreement after the end of the Due Diligence Period and,
immediately prior to the time of such termination, Buyer would have had the
right to elect to terminate this Agreement pursuant to Section 8.2; (iii) Buyer
elects to terminate this Agreement pursuant to Section 8.2; (iv) any termination
occurs by mutual consent pursuant to Section 8.2(a) or by passage of time
pursuant to the introductory paragraph of Section 8.2; or (v) any closing
condition set forth in Section 7.1 or Section 7.2 has not been satisfied (or
waived in writing by Buyer) prior to or on the Closing Date (other than by
reason of a default by Buyer or the lack of a required performance by Buyer).
(c) PAID TO SELLER AT CLOSING. In the event of a Closing, the
Deposits shall be paid to Seller and Buyer shall receive a credit against the
Purchase Price in the amount of the Deposits as provided in Section 1.4(a).
(d) OTHERWISE PAID TO THE COMPANY. If the Deposits are paid neither
to Seller nor to Buyer pursuant to either of the preceding two paragraphs, on
the day after this Agreement terminates the Deposits shall be paid to the
Company.
1.7 DUE DILIGENCE PERIOD. Buyer, or Buyer's designee, shall have
until October 15, 1998 (the "Due Diligence Period") to complete Buyer's due
diligence review of the Company, the Business, the Property, the Intangible
Property and all associated matters. During such period, the Company shall (as
more fully set forth in Section 5.1) provide Buyer reasonable access to the
properties, records, personnel and tenants of the Company and its Subsidiaries
for the purpose of conducting Buyer's due diligence review. In the event that
one or more of the due diligence matters set forth in Section 4.1 (Due Diligence
Conditions Precedent) have not been approved in writing by Buyer in Buyer's sole
good faith discretion on or prior to the final day of the Due Diligence Period,
in Buyer's sole discretion, this Agreement shall automatically terminate (as
more fully set forth in Section 8.1). If this Agreement is terminated solely on
the grounds set forth in Section 8.1, the Deposits made through the termination
date shall be paid to the Company pursuant to Section 1.6(d).
1.8 THE CLOSING. The Closing will take place at the offices of
Miller, Nash, Wiener, Hager & Xxxxxxx LLP, 000 X.X. Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxx, Xxxxxx at 12:00 noon on October 30, 1998 (the "Scheduled Closing
Date"), PROVIDED that all of the conditions to closing set forth in this
Agreement have been satisfied or waived at such time, or on such later date as
Seller and Buyer may mutually agree in writing (the "Closing Date"). The
Parties shall use commercially reasonable efforts to effectuate the Closing by
the Scheduled Closing Date.
1.9 POSSIBLE RESTRUCTURING OF TRANSACTION. Notwithstanding anything
to the contrary contained in this Agreement, the parties to this Agreement
hereby agree that upon any reasonable request by any such party to restructure
the transactions contemplated by this Agreement (in order to make such
transactions eligible for beneficial tax treatment or otherwise),
17
the parties shall accommodate such request (at no incremental cost to any
non-requesting party) and all other terms and conditions of this Agreement shall
remain in full force and effect unmodified. Such a request and such a
restructuring will be deemed to be reasonable if it does not extend the Closing
Date past the Scheduled Closing Date and does not result in any adverse
financial consequences to any non-requesting party, compared to the financial
consequences of the present structure.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise indicated on SCHEDULE 2.0 ("Seller's Disclosure
Schedule"), the Company represents, warrants and agrees, solely for the benefit
of Western and Buyer (jointly and severally), as follows; and each of the
Selling Stockholders represents, warrants and agrees, solely for the benefit of
Western and Buyer (jointly and severally) as set forth in Section 2.3 below.
2.1 ORGANIZATION OF THE COMPANY AND SUBSIDIARIES; POWER AND
AUTHORITY; RELATED MATTERS. The Company is a corporation duly organized and
validly existing under the Laws of the State of Oregon. SCHEDULE 2.1 lists, as
of the date of this Agreement, all Subsidiaries of the Company and correctly
sets forth the capitalization of each Subsidiary and the Company's ownership
interest therein, any other interest of Seller or any other Person therein, the
jurisdictions in which each Subsidiary was organized and each jurisdiction in
which the Company and each Subsidiary are required to be qualified or licensed
to do business as a foreign Person. Each of the Subsidiaries is duly organized
and validly existing under the Laws of the jurisdiction of its incorporation or
organization. The Company and its Subsidiaries have all necessary power and
authority (including full corporate power and authority) to own their respective
properties and assets and to carry on their respective businesses as now
conducted and to execute, deliver and perform this Agreement and all related
agreements to the extent a party thereto. The Company and its Subsidiaries are
duly qualified or licensed to do business as foreign corporations in good
standing in all jurisdictions in which the character or the location of the
assets owned or leased by any of them or the nature of the business conducted by
any of them requires licensing or qualification. SCHEDULE 2.1 also correctly
lists the current directors and executive officers of the Company and of each
Subsidiary. True, correct and complete copies of the respective charter
documents of the Company and the Subsidiaries as in effect on the date of this
Agreement have been, and any amendments thereto through the Closing Date will
be, promptly delivered to Buyer and Buyer's counsel at the earliest opportunity
after the execution of this Agreement. Neither the Company nor any Subsidiary
is a registered or reporting company under the Exchange Act.
2.2 STOCK. Seller owns all of the outstanding shares of Common
Stock of the Company beneficially, all of which are listed in SCHEDULE 1.0. No
other Equity Securities of the Company are outstanding. Except as described in
SCHEDULE 2.1, the Company now owns, and will own on the Closing Date, all of the
outstanding Equity Securities of each of the Subsidiaries, beneficially and of
record. All of such Equity Securities of the Company and Subsidiaries are owned
free and clear of any Encumbrance. At the Closing, Buyer shall acquire good and
marketable title to and complete ownership of the Stock, free of any
Encumbrance. The authorized capital stock of the Company consists of 100,000
shares of common stock, no par
18
value, of which 33,495 shares are issued and outstanding. There are no
outstanding Contracts or other rights to subscribe for or purchase, or Contracts
or other obligations to issue or grant any rights to acquire, any Equity
Securities of the Company or any Subsidiary, or to restructure or recapitalize
the Company or any Subsidiary. There are no outstanding Contracts of Seller,
the Company or any Subsidiary to repurchase, redeem or otherwise acquire any
Equity Securities of any of such entities. All Equity Securities of the Company
and its Subsidiaries, are duly authorized, validly issued and outstanding and
are fully paid and nonassessable and were issued in conformity with all
applicable Laws. There are no preemptive rights in respect of any Equity
Securities of Xxxxx'x Road Investments, Inc. There are preemptive rights in
respect of Equity Securities of the Company and Xxxxxx'x Wholesale Grocery Co.
as set forth in Oregon Revised Statutes Section 60.174 (and such rights are
validly waived by the Selling Stockholders in Section 6.5(a) of this Agreement).
No Person other than the Selling Stockholders holds any preemptive rights in
respect of any Equity Securities of the Company. No person other than the
Company holds any preemptive rights in respect of Equity Securities of Xxxxxx'x
Wholesale Grocery Co. Any Equity Securities of the Company or any Subsidiary
which were issued and reacquired by any of such entities were so reacquired
(and, if reissued, so reissued) in compliance with all applicable Laws, and
neither the Company nor any Subsidiary has any outstanding obligation or
liability with respect thereto. Except as described in SCHEDULE 2.2, the
Company owns no Equity Securities of any entity that is not a Subsidiary.
2.3 OWNERSHIP BY SELLING STOCKHOLDERS; ENFORCEABILITY OF PURCHASE
AGREEMENT. Except as otherwise indicated on Seller's Disclosure Schedule, the
Company and each of the Selling Stockholders represent, warrant and agree,
solely for the benefit of Western and Buyer (jointly and severally), as follows
(except that as to matters (a)(i), (a)(ii), (a)(iv), (b), (c), (d)(i), (e), (f)
and (g) below, each Selling Stockholder represents, warrants and agrees with
respect only to itself and the shares of Stock held by it):
(a) CURRENT HOLDINGS. Except as otherwise set forth in the
footnotes to SCHEDULE 1.0, (i) each Selling Stockholder is the sole beneficial
owner of the number of shares of Stock of the Company in the specific amount set
forth opposite its name in SCHEDULE 1.0, (ii) each Selling Stockholder is the
sole record holder of the number of shares of Stock set forth opposite its name
in SCHEDULE 1.0, (iii) no entity other than the Selling Stockholders owns any
Stock of the Company, beneficially or of record, and (iv) SCHEDULE 1.0,
(including, without limitation, the footnotes thereto) is a true, correct and
complete description of the outstanding beneficial and record ownership of the
Stock owned by each Selling Stockholder as of the date of this Agreement.
(b) GOOD TITLE. Each Selling Stockholder has good and marketable
title to the shares of the Stock which are to be transferred on the Closing Date
to Buyer by each such Selling Stockholder pursuant to this Agreement, free and
clear of any and all covenants, conditions, marital property rights, or other
Encumbrances.
(c) POWER AND AUTHORITY.
(i) CORPORATE STATUS; AUTHORIZATION. Each Selling
Stockholder listed as a corporation or trust in SCHEDULE 1.0 is a
corporation or trust, as applicable, duly organized and validly existing
under the Laws of the jurisdiction of its incorporation or organization;
and each such Selling Stockholder has all necessary corporate or trust, as
19
applicable, power and authority to execute, deliver and perform this
Agreement and any related agreements to which it is a party, including,
without limitation, the power and authority to transfer, convey and sell to
Buyer at the Closing the Stock to be sold to Buyer by such Selling
Stockholder; and the execution, delivery and performance of this Agreement
and any related agreements by all such entities have been duly and validly
authorized by all necessary corporate or trust action, as applicable, on
the part of each such Selling Stockholder and its board of directors or
trustees, as applicable.
(ii) ESTATE POWER AND AUTHORITY. The Estate of Xxxx Xxxxx
(the "Estate"), listed as a Selling Stockholder in SCHEDULE 1.0, is an
estate, validly existing under the Laws of the State of Oregon; and the
Estate (and all trustees, executors or other representatives) has all
necessary power and authority to execute, deliver and perform this
Agreement and any related agreements to which it is a party, including,
without limitation, the power and authority to transfer, convey and sell to
Buyer at the Closing the Stock to be sold to Buyer by the Estate; and the
execution, delivery and performance of this Agreement and any related
agreements by the Estate (and any trustees) have been duly and validly
authorized by all necessary action on the part of the Estate (or trustees,
as applicable) and its personal representatives. The personal
representatives of the Estate are Xxxx X. Xxxxx and Xxxxx Xxxxxxxx.
(iii) INDIVIDUAL CAPACITY. Each Selling Stockholder listed as
an individual in SCHEDULE 1.0 has the full capacity, right, power and
authority to execute, deliver and perform this Agreement and any related
agreements to which it is a party, including, without limitation, the
capacity, right, power and authority to transfer, convey and sell to Buyer
at the Closing the Stock to be sold to Buyer by such Selling Stockholder.
(d) TRANSFER. Upon consummation of the Closing, without exception,
(i) Buyer and/or its designee will acquire from each Selling Stockholder legal
and beneficial ownership of, good and marketable title to, and all right to vote
the Stock to be sold to Buyer by each Selling Stockholder, free and clear of all
covenants, conditions, marital property rights, security interests, mortgages,
pledges, lieu encumbrances or other Encumbrances and (ii) Buyer and/or its
designee will own all of the outstanding capital stock of the Company.
(e) EXECUTION; DELIVERY; ENFORCEABILITY. This Agreement has been
and all other agreements contemplated in this Agreement to be executed by any
Selling Stockholder in any capacity have been or will have been prior to the
Closing, duly executed and delivered by each Selling Stockholder, to the extent
a party thereto, and constitutes and will constitute the legally valid and
binding obligation of each such Selling Stockholder enforceable against each
such Selling Stockholder in accordance with their respective terms.
(f) NO CONTRARY LAWS OR ACTIONS. No Selling Stockholder is a party
to, subject to or bound by any Law, and no Action is pending or threatened
against any Selling Stockholder that would prevent or adversely affect the
execution, delivery or performance by such Selling Stockholder or the Company of
this Agreement or any other agreement herein contemplated to be entered into by
any of them in any capacity or the transfer, conveyance and sale of the Stock to
be sold by such Selling Stockholder to Buyer pursuant to the terms of this
Agreement.
20
(g) NO CONFLICTS. Neither the execution and delivery of this
Agreement or any related agreements, nor the consummation of the transactions
contemplated by this Agreement nor the fulfillment of the terms of this
Agreement, by each Selling Stockholder violates or will violate or results or
will result in a breach of any of the terms and provisions of, or constitutes or
will constitute a default (whether upon lapse of time and/or the occurrence of
any act or event or otherwise) under, or conflicts or will conflict with, or
results or will result in any augmentation or acceleration of rights, benefits
or obligations of any party under, any Contract to which any Selling Stockholder
is a party or is bound, or any Order applicable to any Selling Stockholder or
the Articles of Incorporation, Bylaws, Partnership Agreement or other
organization document of any of any Selling Stockholder that is not a natural
person.
2.4 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) FINANCIAL STATEMENTS. Seller has delivered to Buyer
consolidated and consolidating balance sheets for the Company and its
Subsidiaries at November 29, 1997, November 30, 1996 and November 25, 1995 and
the related consolidated statements of operations, changes in stockholder's
equity and changes in financial position or cash flow for the periods then
ended. Except as set forth therein, all such financial statements have been
reviewed by the Previous Accountants and the Previous Accountants' reports
thereon are included with such financial statements. All such financial
statements have been prepared in conformity with GAAP applied on a consistent
basis (except for changes, if any, required by GAAP and disclosed therein) and
the Accountants are not aware of any material modifications that should be made
thereto. Such statements of operations and cash flow present fairly the results
of operations and cash flows of the Company and its Subsidiaries for the
respective periods covered, and the balance sheets present fairly in all
material respects the financial condition of the Company and its Subsidiaries as
of their respective dates. Seller has made available to Buyer copies of each
management letter or other letter delivered to Seller or the Company by the
Previous Accountants in connection with such financial statements or relating to
any review by the Previous Accountants of the internal controls of the Company
during the five (5) year period ended November 29, 1997 or thereafter, and upon
request will make available for inspection all surviving reports and working
papers produced or developed by the Previous Accountants or management in
connection with their review of such financial statements, as well as all such
reports and working papers for prior periods for which any tax liability of the
Company has not been finally determined or barred by applicable statutes of
limitation. Since the date of the reviewed financial statements mentioned
above for the fiscal year ended November 29, 1997, there has been no change in
any of the significant accounting policies, practices or procedures of the
Company or the Subsidiaries.
(b) INTERNALLY PREPARED INTERIM FINANCIAL STATEMENTS. The Company
has delivered to Buyer consolidating balance sheets for the Company and its
Subsidiaries for the fiscal month ended March 30, 1998, and the related
consolidating statement of operations for the period then ended. Such interim
financial statements have been prepared by the Company with the assistance of
the Accountants. All such interim financial statements have been prepared in
conformity with GAAP applied on a consistent basis except for changes, if any,
required by GAAP and disclosed with particularity therein. The statement of
operations presents fairly the results of operations of the Company and its
Subsidiaries for the respective periods covered, and the balance sheets present
fairly in all material respects the financial condition of the Company as of
their respective dates. All such interim financial statements reflect all
adjustments (which
21
consist only of normal recurring adjustments not material in amount and include,
but are not limited to, estimated provisions for year-end adjustments) necessary
for a fair presentation. At the dates of such balance sheets, neither the
Company nor its Subsidiaries had any material liability (actual, contingent or
accrued) that, in accordance with GAAP applied on a consistent basis, should
have been shown or reflected therein but were not.
(c) NO MATERIAL ADVERSE CHANGES. Since March 30, 1998, whether or
not in the ordinary course of business, there has not been, occurred or arisen
any of the following:
(i) any change in or event affecting the Company, the
Business, any Store, any Lease, any Tenant, any Material Contract or the
Stock that has had or may reasonably be expected to have a material adverse
effect on the Company, the Business, any Store, any Material Contract or
the Stock;
(ii) any agreement, condition, action or omission which would
be proscribed by (or require consent under) Section 5.5 had it existed,
occurred or arisen after the date of this Agreement;
(iii) any strike or other labor dispute of any employees of the
Company or any Subsidiary or at any of the Stores or affecting any Tenant
that has had or may reasonably be expected to have a material adverse
effect on the Company, the Business, any Store, any Material Contract or
the Stock;
(iv) any casualty, loss, damage, destruction or forfeiture
(whether or not covered by insurance) of any material property of the
Company or its Subsidiaries or any Tenant that has had or may reasonably be
expected to have a material adverse effect on the Company, the Business,
any Store, any Material Contract or the Stock; or
(v) any legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened, (A) against
or affecting the Company, any of its Subsidiaries, any Tenant or any
Selling Stockholder, (B) which has as the subject thereof, directly or
indirectly, the Stock or this Agreement or any officer or director of, or
property owned or leased by, the Company or any of its Subsidiaries or (C)
relating to environmental or discrimination matters, where in any such case
(1) there is a reasonable possibility that such action, suit or proceeding
might be determined adversely to the Company or such Subsidiary and (2) any
such action, suit or proceeding, if so determined adversely, would
reasonably be expected to be material to the Business or any Store or
materially and adversely to affect the consummation of the transactions
contemplated by this Agreement (each of the items in clauses (i) though (v)
a "Material Adverse Change").
(d) NO UNACCOUNTED FOR LIABILITIES OR CONTINGENCIES. Neither the
Company nor any Subsidiary has any liabilities of any nature required to be
disclosed by GAAP, whether accrued, absolute, contingent or otherwise, and
whether due or to become due, probable of assertion or not, except liabilities
that (i) are reflected or disclosed in the most recent of the financial
statements referred to in Section 2.4(a) or Section 2.4(b), (ii) were incurred
after March 30, 1998 in the ordinary course of business and individually do not
exceed Ten Thousand Dollars
22
($10,000) and in the aggregate do not exceed Thirty Thousand Dollars ($30,000)
or (iii) will be satisfied prior to the Closing.
2.5 TAX AND OTHER RETURNS AND REPORTS. The Company and each
Subsidiary have timely filed or will file (or, where permitted or required, its
respective direct or indirect parents have timely filed or will file) all
required Tax Returns and have paid or accrued (and shall accrue on the Closing
Balance Sheet) all Taxes due for all periods ending on or before June 27, 1998.
Adequate provision has been made in the books and records of the Company and
each Subsidiary (and shall be made on the Closing Balance Sheet), and to the
extent required by GAAP in the financial statements referred to in Section 2.4
above or delivered to Buyer, for all Taxes of the Company whether or not due and
payable and whether or not disputed. Neither the Company nor any Subsidiary has
elected to be treated as a consenting corporation under Section 341(f) of the
Code. SCHEDULE 2.5 lists the date or dates through which the IRS and any other
Governmental Entity have examined the United States federal income tax returns
and any other Tax Returns of the Company and its Subsidiaries. All required Tax
Returns, including all amendments, have been prepared in good faith without
negligence or willful misrepresentation and are complete and accurate in all
material respects. Except as set forth in SCHEDULE 2.5, no Governmental Entity
has, during the past three (3) years, examined or is in the process of examining
any Tax Returns of the Company or any Subsidiary or making any inquiries with
respect thereto. Except as set forth on SCHEDULE 2.5, no Governmental Entity
has proposed (tentatively or definitively), asserted or assessed or, to the
knowledge of the Company, threatened to propose or assert, any deficiency,
assessment or claim for Taxes and there would be no basis for any such
delinquency, assessment or claim.
2.6 MATERIAL CONTRACTS. SCHEDULE 2.6 lists each Contract to which
the Company or any Subsidiary is a party or to which the Company, any Subsidiary
or any of their respective Properties is subject or by which any of their
property is bound that is deemed a Material Contract under this Agreement.
Unless otherwise so noted on SCHEDULE 2.6, each such Contract was entered into
in the ordinary course of business. Each Contract that (a) obligates the
Company to pay an amount of Five Thousand Dollars ($5,000) or more (individually
or in the aggregate) after Xxxxx 00, 0000, (x) has an unexpired term as of June
1, 1998 in excess of one month, (c) represents a contract upon which the
Business is substantially dependent or which is otherwise material to the
Business, (d) provides for an extension of credit inconsistent with normal and
customary credit terms, (e) limits or restricts the ability of the Company or
any Subsidiary to compete or otherwise to conduct its business in any manner or
place, including confidentiality agreements, (f) provides for a guaranty,
suretyship, performance bond, or indemnity by the Company or any Subsidiary,
(g) grants a power of attorney, agency or similar authority to another person or
entity, (h) contains a right of first refusal, (i) grants any Encumbrance upon
any asset of the Company or any Subsidiary, (j) involves bonus, stock option,
severance, golden parachute, deferred compensation, special retirement,
consulting or similar arrangements for the benefit of one or more of the current
or former directors, officers or employees of the Company or any Subsidiary, (k)
creates any partnership or joint venture, (l) contains a right or obligation
other than in the ordinary course of business of any Affiliate, officer or
director or any Associate, of Seller, the Company or any Subsidiary to the
Company or any Subsidiary, or (m) requires the Company or its Subsidiaries to
buy or sell goods or services with respect to which there will be material
losses or will be costs and expenses materially in excess of expected receipts
(other than as provided for or otherwise reserved against on the most recent of
the balance sheets referred to in Section 2.4) or (n) was not made in the
23
ordinary course of business, shall be deemed to be a Material Contract and has
been identified on such SCHEDULE 2.6. True, correct and complete copies of the
Material Contracts appearing on SCHEDULE 2.6, including all amendments and
supplements entered into through the date of this Agreement, have been delivered
to Buyer. Each Material Contract is valid and subsisting; the Company or the
applicable Subsidiary has duly performed all of its material obligations
thereunder to the extent that such obligations to perform have accrued; and
except as will not be material to the Company, no breach or default, alleged
breach or default, or event which would (with the passage of time, notice or
both) constitute a breach or default thereunder by the Company or its
Subsidiary, as applicable, or, to the best knowledge of the Company, any other
party or obligor with respect thereto, has occurred or as a result of this
Agreement or performance thereof will occur. Consummation of the transactions
contemplated by this Agreement will not (and will not give any person a right
to) terminate or modify any rights of, or accelerate or augment any obligation
of, the Company or any Subsidiary under any of the Material Contracts.
2.7 REAL AND PERSONAL PROPERTY; RELATED MATTERS.
(a) CURRENT HOLDINGS. On the date of this Agreement, the Company
and its Subsidiaries own all of the following:
(i) LAND. Fee simple title to the land more particularly
described in SCHEDULE 2.7(A)(I) attached to this Agreement (the "Land"),
located in the cities specified in SCHEDULE 2.7(A)(I), and no other land;
(ii) PARKING. All on-site parking on the Land (the "Parking
Facilities");
(iii) IMPROVEMENTS. All buildings, structures and improvements
on the Land (collectively, the "Improvements"), including, without
limitation, those improvements more particularly described in SCHEDULE
2.7(A)(III);
(iv) LEASEHOLDS. All right, title and interest of lessee in
and to the leaseholds (the "Leaseholds") set forth on SCHEDULE 2.7(A)(IV)
and no other interest of lessee in or to any leasehold;
(v) LEASES. All right, title and interest of lessor in and
to the leases (the "Tenant Leases" and, together with the Leaseholds, the
"Leases") set forth on the rent roll (the "Rent Roll") attached to this
Agreement as SCHEDULE 2.7(A)(V) (which Schedule specifically identifies the
Leases for each Property) and no other right, title or interest of lessor
in or to any lease. The term "Leases" shall also refer to, without
limitation, any amendments or modifications to any Lease, the Company's
interest in any and all security deposits and prepaid rent, if any, under
any Lease, the Company's interest in any and all guaranties of any Leases,
as such guaranties may be amended from time to time to reflect new leases,
and the Company's interest in any and all occupancy agreements and
operating agreements with tenants and occupants occupying space on the Land
or on any Leasehold. The Land, the Parking Facilities, the Improvements
and the Leases are collectively referred to as the "Realty."
24
(vi) PERSONAL PROPERTY. All fixtures, equipment, rolling
stock, tools, spare parts, supplies, furnishings, furniture and equipment,
appliances, and items of personal property used or held for use in the
operation, maintenance and repair of the Realty or in connection with the
Business, as of the date of this Agreement, including the personal property
listed, inventoried and described in SCHEDULE 2.7(A)(VI) (which
specifically identifies the Property on which the Personal Property is
located), and all inventories, raw materials, work-in-progress, finished
goods, and merchandise held for sale in connection with the Business (other
than stock on consignment, merchandise or supplies that are damaged or in
broken units, merchandise beyond the applicable usable date and merchandise
that is otherwise not salable due to its condition) (together with any
other personal property owned by the Company and all additional personal
property acquired by the Company prior to the Closing Date, the "Personal
Property");
(vii) PLANS AND DRAWINGS. All architectural plans, as-built
mechanical, electrical and structural drawings, plans and specifications,
reports, studies, tests, surveys, appraisals, and like items relating to
the Realty (the "Plans");
(viii) CONTRACT RIGHTS. All of the Company's rights under the
Material Contracts (the "Contract Rights");
(ix) OTHER RIGHTS. All Marks (including, without limitation,
the names "Xxxxxx'x," "Xxxxxx'x Food Stores" and "Bohemian Bakery"),
licenses, franchises, permits, consents, approvals, guarantees, warranties,
instruction manuals and other rights used in connection with the Business
or pertaining to ownership and/or operation of the Realty and Personal
Property, including, without limitation, all right, title and interest to
mineral rights (except as disclosed in the Title Reports), monument signage
and other rights in Realty (collectively, together with the Contract
Rights, the "Rights");
(x) APPURTENANT RIGHTS. All easements, parking rights,
strips and gores of land lying adjacent to the Property, privileges,
rights-of-way, riparian and other water rights, and appurtenances
pertaining to or accruing to the benefit of the Land (collectively, the
"Appurtenant Rights"). The Realty, the Personal Property, the Plans, the
Rights and the Appurtenant Rights, together with all other interests of the
Company and its Subsidiaries in real or personal property, are collectively
referred to as the "Property."
(b) EXCLUDED ASSETS. On the Closing Date, the Company shall
continue to own all of the Property, except for inventory and supplies disposed
of in the ordinary course of business and except for the assets listed on
SCHEDULE 2.7(B) (the "Excluded Assets"). The net book value of the Excluded
Assets is less than Ten Thousand Dollars ($10,000) in the aggregate.
(c) COMPLIANCE WITH LAWS. Except as set forth in Seller's
Disclosure Schedule or as specifically qualified by this Agreement, there is no
violation of any applicable statute, ordinance, regulation, order or other Law
at the Property (including, without limitation, parking requirements or zoning,
or environmental regulations concerning the use of the Property or the existence
or construction of the Improvements) which would have an adverse effect on the
business. Except as set forth on Seller's Disclosure Schedule, Seller and the
Company represent
25
and warrant that within the last twenty-four (24) months the Company has not
received any written notice from any governmental entity regarding a violation
of applicable Law, including, without limitation, the Americans With
Disabilities Act, 42 U.S.C. Sections 12101-12213.
(d) DEFECTS. Except as set forth in Seller's Disclosure Schedule
and except as disclosed with specificity (as to the nature and extent of the
defect) in (a) the reports referenced in Seller's Disclosure Schedule or (b) the
reports prepared for Buyer or Western by a consultant under contract with Buyer
or Western and delivered to Buyer or Western prior to the end of the Due
Diligence Period, to the best knowledge of the Company, (i) the Property is in
good and functional condition (normal wear and tear excepted) and there are no
Material Defects, as hereinafter defined, in the Property (nor has the Company
received any notice from any person of any defects in the Property), and (ii)
within the last five years, the Property has not been damaged in any earthquake
or fire and Seller has not been denied earthquake, fire or any other insurance
coverage at the Property by any insurance carrier. For the purposes of this
Section 2.7, the term "Material Defects" shall mean (A) any defect in the soil
at the Property or in the structural portions of the Improvements, including,
without limitation, roofs, foundations, basic building systems, life-safety
systems and parking lots, or (B) any other defects costing, in the aggregate,
more than Fifty Thousand Dollars ($50,000) to repair, replace or restore.
(e) ACTIONS PENDING. The Company has not received written notice of
any, and there are no, proceedings (judicial or administrative), actions, or
suits (including, without limitation, any condemnation, eminent domain,
annexation, land use or similar proceedings) existing, pending, involving, or
threatened against the Property, except as set forth in Seller's Disclosure
Schedule.
(f) TITLE. The Company is the legal and equitable owner of the
Property, with full right to convey the same. Without limiting the generality
of the foregoing, the Company has not granted any options or rights to third
parties to purchase or otherwise acquire or encumber any interest in the
Property.
(g) CONTINUING OBLIGATIONS. The Company has completed all
development obligations applicable to the Property, as described more
particularly on SCHEDULE 2.7(G) ("Completed Development Obligations"), and the
Completed Development Obligations have been completed in a good and workmanlike
fashion in accordance with all applicable Laws, and have been accepted by the
party for whom such work was to be done and by all applicable governmental
agencies. There are no agreements in connection with the Property which will be
binding upon the Company or the Property after Closing, except (A) the
agreements referenced in SCHEDULE 2.7(G) ("Continuing Development Obligations"),
(B) those contracts and other agreements set forth in the schedule of Material
Contracts, (C) the Leases and (D) as disclosed in the Title Reports.
(h) UTILITIES. All water, sewer, gas, electric, telephone and
drainage facilities and all other utilities, including, without limitation,
garbage collection, required by Law or for the normal operation of the Property
in a fully occupied condition (A) are installed to the property lines of the
Property, (B) are adequate to service the Property in a fully operational
condition, and (C) have been connected to the Improvements with valid permits.
26
(i) CERTIFICATES OF OCCUPANCY. The Company has final, binding and
valid Certificates of Occupancy (respecting the shell building and the tenant
premises) for all of the Improvements and there are no conditions to such
Certificates of Occupancy that remain unfulfilled.
(j) ENCUMBRANCES. The Company has not entered into, or permitted to
be entered into, any unrecorded financing, debt or other payment obligation
encumbering the Property (or currently planned or contemplated to encumber the
Property), or any assessments imposed by any governmental or quasi-governmental
agency, which will be binding on the Company or the Property after the Closing
Date, except as set forth in Seller's Disclosure Schedule.
(k) ENVIRONMENTAL COMPLIANCE. Except as disclosed in Seller's
Disclosure Schedule, except as to Hazardous Substances currently located above
ground and except as disclosed with specificity (as to nature and quantity) in
(a) the environmental reports referenced in Seller's Disclosure Schedule or (b)
the environmental reports prepared for Buyer or Western by an environmental
consultant under contract with Buyer or Western and delivered to Buyer or
Western prior to the end of the Due Diligence Period, (i) neither the Company
nor any Subsidiary has (or, prior to the Closing Date, will have) generated,
used, transported, treated, stored, released or disposed of, or suffered or
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance on any Property in violation of any Laws;
(ii) there has not been, and prior to the Closing Date there will not be, any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with the conduct of the Business of the
Company or any Subsidiary or the use of any Property or facility of the Company
or of any Subsidiary or, to the best of the Company's knowledge, any nearby or
adjacent properties or facilities, which has created or might reasonably be
expected to create any liability under any Laws or which would require reporting
to or notification of any Governmental Entity; (iii) to the best of the
Company's knowledge, there is not and prior to the Closing Date there will not
be any Hazardous Substances present at any property or facility, other than the
properties or facilities of the Company or any Subsidiary, for which the Company
or any Subsidiary is responsible by reason of events antedating the Closing;
(iv) no asbestos or polychlorinated biphenyl or underground storage tank is
contained in or located at any facility of the Company or any Subsidiary that is
not operated and maintained in compliance with applicable law; and (v) any
Hazardous Substance handled or dealt with in any way in connection with the
businesses of the Company or any Subsidiary, whether before or during Seller's
ownership, has been and is being handled or dealt with in all material respects
in compliance with applicable Laws. Insecticide, fungicide, and rodenticide,
and other pesticide inventories of the Company and its Subsidiaries are
comprised only of such substances as are properly registered with the
Environmental Protection Agency in accordance with the Federal Insecticide,
Fungicide and Rodenticide Act, U.S.C. Section 136 et seq., and none of such has
been used, handled, or applied other than in material compliance with applicable
Laws and regulations and manufacturers' labels and instructions. The Company
represents and warrants that (A) neither the Company or any Subsidiary has
received in writing either a "Special Notice" or a "General Notice" from the
United States Environmental Protection Agency (or from any state or local
governmental agencies) with regard to any Superfund Site, and (B) to the best
knowledge of the Company, no tenant or lessor at the Property has received such
notice(s).
27
(l) LEASES. Except in each case as set forth in Seller's Disclosure
Schedule, the Certified Rent Roll, the Tenant Estoppel Certificates or the
Lessor Estoppel Certificates (as hereinafter defined), there are no (i) uncured
monetary or non-monetary defaults (with or without the giving of notice or the
passage of time) under any Lease, (ii) outstanding notices of default or
termination under any of the Leases, (iii) written notices from any tenant that
the Company is in default or not complying with the Company's obligations, as
landlord, under any Lease, (iv) written notices from any lessor that the Company
is in default or not complying with the Company's obligations, as tenant, under
any Lease, (v) Unexpired Concessions, (vi) rights granted to any tenant pursuant
to a Lease that could cause a different tenant to assert possessory rights
against the identical portion of the Property, or (vii) rights granted to any
tenant pursuant to a Lease that could cause a different tenant to claim
exclusive use rights with respect to the permitted use of such tenant's leased
premises.
(m) SUBLEASES PERMITTED. Except as disclosed in Seller's Disclosure
Schedule, each of the Leases under which the Company is a tenant permit
subleasing in the Company's sole and absolute discretion.
(n) CREDITWORTHINESS OF TENANTS. Except as disclosed in Seller's
Disclosure Schedule, to the best knowledge of the Company, no tenants of the
Property and no guarantors under any of the Lease Guaranties have undertaken or
are threatening bankruptcy, financial restructuring, store closures at the
Property or temporary or permanent cessation of business operations at the
Property.
(o) SUBDIVISION AND ZONING OF LAND. There are no unfinished
conditions or obligations remaining with respect to the legal creation of each
individual legal parcel of the Land.
(p) BROKERAGE COMMISSIONS. No brokerage commission or similar fee
is currently due or unpaid by the Company with respect to any Lease or the
Property, and there is no written or oral agreement that will obligate the
Company to pay any commission or fee under any Lease or with respect to the
Property.
(q) CONSTRUCTION OF IMPROVEMENTS. Except as set forth in Seller's
Disclosure Schedule and except as specifically addressed and described in
reasonable detail (as to the nature and extent) in (a) the reports referenced in
Seller's Disclosure Schedule or (b) the reports prepared for Buyer or Western by
a consultant under contract with Buyer or Western and delivered both to Seller
and to Buyer or Western prior to the date of this Agreement, (i) the
Improvements have been constructed in material compliance with the applicable
plans, specifications and Leases and (ii) there are no unsatisfied construction
obligations of the Company under any of the plans, specifications or Leases.
(r) WETLANDS. The Company has not received any written notice from
the Army Corps of Engineers indicating that any portion of the Property is
located in a "wetland", as that term is defined in 33 CFR Section 328.3(b), 40
CFR Section 230.3, and applicable state statutes and related provisions. Except
as disclosed in Seller's Disclosure Schedule, to the best knowledge of the
Company, no portion of the Property is located in a "wetland."
28
(s) XXXXX. Except as disclosed in Seller's Disclosure Schedule, to
the best knowledge of the Company, there are not now and will not be on the
Closing Date any existing or abandoned xxxxx on or in the Property.
(t) RENT CONTROL. Except as disclosed in Seller's Disclosure
Schedule or the applicable lease, no rent control is applicable with respect to
any Property.
(u) PUNCHLIST. Except as disclosed in Seller's Disclosure Schedule,
there is no outstanding, incomplete and/or pending construction and development
work at the Property, including, without limitation, improvement work of the
shell, core, common areas between tenant premises that are subject to Leases at
the Property.
2.8 INTANGIBLE PROPERTY. SCHEDULE 2.8 lists any and all Marks and
other material items of Intangible Property in which the Company or its
Subsidiaries have an interest and the nature of such interest. Such assets
include all Permits or other rights with respect to any of the foregoing. The
Company and its Subsidiaries have rights to and ownership of all Intangible
Property required for use in connection with the Business, the absence of which
would have a material adverse effect on the Business; and will retain such
ownership through the Closing Date. The Company and its Subsidiaries do not use
any Intangible Property by consent of any other person and are not required to
and do not make any payments to others with respect thereto. Except as
disclosed in Seller's Disclosure Schedule, the Intangible Property of the
Company and its Subsidiaries is fully assignable, free and clear of any
Encumbrances. The Company and its Subsidiaries have performed all obligations
required to be performed by them, and none of such entities is in default under
any Contract relating to any of the foregoing. Neither Seller, the Company nor
any Subsidiary has received any notice to the effect (or is otherwise aware)
that the Intangible Property or any use by the Company or any Subsidiary of any
such property conflicts with or allegedly conflicts with or infringes the rights
of any Person.
2.9 AUTHORIZATION; NO CONFLICTS; ALL PERMITS.
(a) NO CHARTER VIOLATIONS. Neither the Company nor any of its
Subsidiaries is in violation of its respective charter documents or by-laws.
(b) AUTHORIZATION BY THE COMPANY; ENFORCEABILITY; NO CONFLICTS. The
execution, delivery and performance of this Agreement and any related agreements
by the Company has been duly and validly authorized by the Board of Directors of
the Company and by all other necessary corporate action on the part of the
Company. Each of this Agreement and any related agreements constitutes the
legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The execution, delivery and performance
of this Agreement by the Company and the execution, delivery and performance of
any related agreements or contemplated transactions by the Company or any
Subsidiary will not violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or otherwise) under, the
charter documents or by-laws of any of such entities or any Contract of any of
such entities, result in the imposition of any Encumbrance against any assets or
Properties of the Company or any Subsidiary, or violate any Law.
(c) PERMITS AND APPROVALS. SCHEDULE 2.9 lists all Permits and
Approvals required to be obtained by Seller, the Company or any Subsidiary to
consummate this Agreement,
29
including, without limitation, all Approvals of any third-party with respect to
any Contract. Other than as shall be disclosed to Buyer in writing prior to the
Closing Date, at the Closing Date, all such Permits and Approvals shall have
been obtained by the Company, subject to no unduly burdensome (I.E., costly to
comply with) conditions. Except for matters identified in SCHEDULE 2.9 as
requiring that certain actions be taken by or with respect to a third-party or
Governmental Entity, the execution and delivery of this Agreement by Seller and
the performance of this Agreement by Seller, the Company or any Subsidiary will
not require filing or registration with, or the issuance of any Permit by, any
other third-party or Governmental Entity.
2.10 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS. There is no Order
or Action pending or, to the best knowledge of the Company, threatened, against
or affecting the Company or any Subsidiary or any of their respective Properties
or assets that individually or when aggregated with one or more other Orders or
Actions has or if determined adversely to the interest of the Company, any
Subsidiary or Buyer might reasonably be expected to have a material adverse
effect on the Company or any Subsidiary, on the Business, on Seller's ability to
perform this Agreement, or on any aspect of the transactions specifically
contemplated by this Agreement. There is no organized labor strike, dispute,
slowdown or stoppage, or collective bargaining or unfair labor practice claim
(collectively, "Labor Matters"), pending or, to the best knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or the
Business. SCHEDULE 2.10 lists each Order, Action and Labor Matter that involves
a claim or potential claim of aggregate liability in excess of Five Thousand
Dollars ($5,000) against, or that enjoins or compels or seeks to enjoin or to
compel any activity by the Company or any Subsidiary, including, without
limitation, any Order of the National Labor Relations Board. There is no matter
as to which the Company or any Subsidiary has received any notice, claim or
assertion, or which, to the best knowledge of the Company, otherwise has been
threatened or is reasonably expected to be threatened or initiated, against or
affecting any director, officer, employee, agent or representative of the
Company or any Subsidiary or any other Person, nor, to the best knowledge of the
Company, is there any reasonable basis therefor, in connection with which any
such Person has or may reasonably be expected to have any right to be
indemnified by the Company or any Subsidiary.
2.11 MINUTE BOOKS. The minute books of the Company and its
Subsidiaries (the "Minute Books") accurately reflect all actions and proceedings
taken to date by the respective shareholders, boards of directors and committees
of the Company and its Subsidiaries, and such minute books contain true and
complete copies of the charter documents of the Company and its Subsidiaries and
all related amendments. The stock record books of the Company and each
Subsidiary (the "Stock Record Books") reflect accurately all transactions in
their respective capital stock of all classes.
2.12 ACCOUNTING RECORDS. The Company and its Subsidiaries have
records that accurately and validly reflect their respective transactions, and
accounting controls sufficient to insure that such transactions are (i) executed
in accordance with management's general or specific authorization and
(ii) recorded in conformity with GAAP.
2.13 INSURANCE. The Company and its Subsidiaries are, and at all
times during the past two (2) years have been, insured with reputable insurers
and all of the insurance policies and bonds maintained or required to be
maintained by the Company and its Subsidiaries are in full force and effect.
SCHEDULE 2.13 lists all insurance policies (together with the premiums paid
30
and the dates of coverage of each) and bonds applicable to the Business.
Neither the Company nor any Subsidiary is in default under any such policy or
bond. The Company and its Subsidiaries have timely filed claims with their
respective insurers with respect to all material matters and occurrences for
which they believe they have coverage. All insurance policies maintained by the
Company and its Subsidiaries will remain in full force and effect for their
respective remaining terms and the Company and its Subsidiaries have received no
notice or other indication from any insurer or agent of any intent to cancel or
not to renew any of such insurance policies. The Company and its Subsidiaries
have complied with and implemented all outstanding (i) requirements of any
insurance company that has issued a policy with respect to any of the Properties
and assets of the Company or any Subsidiary and (ii) requirements of the Board
of Fire Underwriters or other body exercising similar functions or any
Governmental Entity with respect to any such insurance policy.
2.14 PERMITS. Except as will not cause a Material Adverse Change,
the Company and its Subsidiaries hold all Permits that are required by any
Governmental Entity to permit each of them to conduct their respective
businesses as now conducted, and all such Permits are valid and in full force
and effect and will remain so upon consummation of this Agreement. To the best
knowledge of the Company, no suspension, cancellation or termination of any of
such Permits is threatened or imminent.
2.15 COMPLIANCE WITH LAW.
(a) ORGANIZATION AND CONDUCT OF BUSINESS. Except as set forth in
Seller's Disclosure Schedule or as specifically qualified by this Agreement or
as would not have an adverse effect on the Business, (i) the Company and its
Subsidiaries are organized and have conducted their respective businesses in
accordance with, and their directors or officers (in their capacity as such)
have acted in accordance with, applicable Laws, (ii) the forms, procedures and
practices of the Company and its Subsidiaries are in compliance with all
applicable Laws, and (iii) the Company and its Subsidiaries have operated the
Stores in compliance with the Occupational Safety and Heath Act, the National
Labor Relations Act, the Fair Labor Standards Act and analogous state laws.
(b) USE AND OPERATION OF PROPERTY. Except as set forth in Seller's
Disclosure Schedule or as specifically qualified by this Agreement or as would
not have an adverse effect on the Business, the use and operation of the
Property of the Company and its Subsidiaries (whether by them, Tenants or
others) are in compliance with all applicable Laws.
(c) ABSENCE OF LOSSES CAUSED BY TORTIOUS NEGLIGENCE OR MISCONDUCT.
Except as specifically qualified by this Agreement or as shall be reflected in
the Final Closing Balance Sheet, there has not occurred and, prior to Closing,
there will not occur any third-party (I.E., other than as to Western or Buyer)
Loss or injury that is not covered by insurance and that is caused by tortious
negligence or misconduct occurring prior to the Closing on the part of the
Company or any Subsidiary or any of their agents or employees (in connection
with the operation and maintenance of the Property or otherwise).
2.16 DIVIDENDS AND OTHER DISTRIBUTIONS. There has been no dividend
or other distribution of assets or securities whether consisting of money,
property or any other thing of value, declared, issued or paid subsequent to the
date of the most recent financial statements
31
described in Section 2.4 by the Company or any Subsidiary, except the
distribution to the Company of shares in the Company owned by its subsidiary,
Xxxxxx'x Wholesale Grocery Company.
2.17 EMPLOYEE BENEFITS.
(a) EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND EMPLOYEE
AGREEMENTS, AND SIMILAR ARRANGEMENTS.
(1) SCHEDULE 2.17(A) lists all employee benefit plans and
collective bargaining, employment or severance agreements or other similar
arrangements to which the Company or any Subsidiary is a party or by which any
of them is bound, legally or otherwise (collectively, "Current Plans"),
including, without limitation, the following: (i) any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, severance, welfare or incentive plan, agreement or
arrangement; (ii) any plan, agreement or arrangement providing for "fringe
benefits" or perquisites to employees, officers, directors or agents, including,
but not limited to, benefits relating to Company automobiles, clubs, vacation,
child care, parenting, sabbatical, sick leave, medical, dental, hospitalization,
life insurance and other types of insurance; (iii) any employment agreement; or
(iv) any other "employee benefit plan" (within the meaning of Section 3(3) of
ERISA).
(2) Seller has delivered to Buyer true, correct and complete
copies of all documents and summary plan descriptions with respect to such
Current Plans, or summary descriptions of any such plans, agreements or
arrangements not otherwise in writing.
(3) To the best knowledge of the Company, there are no
negotiations, demands or proposals that are pending or have been made which
concern matters now covered, or that would be covered, by plans, agreements or
arrangements of the type described in this section.
(4) The Company and its Subsidiaries are in material
compliance with the applicable provisions of ERISA (as amended through the date
of this Agreement), the regulations and published authorities thereunder, and
all other Laws applicable with respect to all Current Plans and with respect to
all other employee benefit plans, agreements and arrangements (including the
types of arrangements referred to in clauses 2.17(a)(1) (i) though (iv) above)
to which the Company or any Subsidiary has within the past six (6) years been a
party or has within the past six (6) years been bound (collectively, "Past
Plans"). The Company and its Subsidiaries have performed all of their material
obligations under all Current Plans and Past Plans. There are no Actions (other
than routine claims for benefits) pending or, to the best knowledge of the
Company, threatened against any Current Plans or Past Plans or their assets, or
arising out of such plans, agreements or arrangements, and all such plans,
agreements and arrangements have been operated in compliance with their terms.
No facts exist, or with respect to multiemployer plans, the Company is not aware
of any facts, which could give rise to any such Actions.
(5) Except as specified in SCHEDULE 2.17(A), each of the
Current Plans, other than multiemployer plans and welfare plans, can be frozen
by the Company or by one of the Subsidiaries within a period of thirty (30) days
following the Closing Date, without
32
payment of any additional compensation or amount or the additional vesting,
other than legally-required vesting on partial or complete termination, or
acceleration of any such benefits and can be terminated and liquidated within a
reasonable time thereafter.
(6) All obligations of the Company and its Subsidiaries under
each Current Plan and Past Plan (i) that are due prior to the Closing Date have
been paid or will be paid prior to that date by the Company and/or its
Subsidiaries, and (ii) that have accrued prior to the Closing Date have been or
will be paid or properly accrued by the Company and/or its Subsidiaries on the
Closing Balance Sheet and the Final Closing Balance Sheet.
(b) QUALIFIED PLANS.
(1) SCHEDULE 2.17(B) lists all "employee pension benefit
plans" (within the meaning of Section 3(2) of ERISA) in SCHEDULE 2.17 that are
also stock bonus, pension or profit-sharing plans within the meaning of
Section 401(a) of the Code.
(2) Each such plan has been duly authorized by the
appropriate board of directors of the Company and each participating Subsidiary.
Each such plan is qualified in form and operation under Section 401(a) of the
Code and each trust under each such plan is exempt from tax under Section 501(a)
of the Code. No event has occurred that will or could give rise to
disqualification or loss of tax-exempt status of any such plan or trust under
such sections which cannot be cured without material liability under one of the
available Internal Revenue Service procedures. No event has occurred that will
or could subject any such plans to tax under Section 511 of the Code. No
prohibited transaction (within the meaning of Section 4975 of the Code) or
party-in-interest transaction (within the meaning of Section 406 of ERISA) has
occurred with respect to any of such plans.
(3) The Company has delivered to Buyer for each such plan
copies of the following documents: (i) the Form 5500 filed in each of the most
recent three plan years, including but not limited to all schedules thereto and
financial statements with attached opinions of independent accountants, (ii)
the most recent determination letter from the IRS, (iii) the consolidated
statement of assets and liabilities of such plan as of its most recent valuation
date, and (iv) the statement of changes in fund balance and in financial
position or the statement of changes in net assets available for benefits under
such plan for the most recently ended plan year. The financial statements so
delivered fairly present the financial condition and the results of operations
of each of such plans as of such dates, in accordance with GAAP, with the
possible exception of retiree health benefit liability under any multiemployer
plan.
(c) TITLE IV PLANS.
(1) SCHEDULE 2.17(C) lists all plans (other than
multiemployer plans) in SCHEDULES 2.17(A) and all Past Plans, that are, in each
case, also subject to Title IV of ERISA.
(2) With respect to each such plan (other than union
multiemployer plans) in which the Company, any Subsidiary or any trade or
business (whether or not incorporated) that is a member of a group of which the
Company is a member and which is under common control within the meaning of
Section 414(b) or (c) of the Code ("ERISA Affiliate") participates or has
participated, (i) neither the Company nor any Subsidiary nor any ERISA
33
Affiliate has withdrawn from such plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a) (2) of ERISA) or has had a
substantial cessation of operations (as defined in Section 4062(e) of ERISA),
(ii) neither the Company nor any Subsidiary nor any ERISA Affiliate has filed a
notice of intent to terminate any such plan or adopted any amendment to treat
any such plan as terminated, (iii) the PBGC has not instituted proceedings to
terminate any such plan, (iv) no other event or condition has occurred which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any such plan, (v) no accumulated
funding deficiency, whether or not waived, exists with respect to any such plan,
no condition has occurred or exists which by the passage of time would be
expected to result in an accumulated funding deficiency as of the last day of
the current plan year of any such plan, and neither the Company nor any
Subsidiary nor any ERISA Affiliate has failed to make full payment when due of
all amounts which under the provisions of any such plan are required to be made
as contributions thereto which were not later brought current, (vi) all required
premium payments to the PBGC have been paid when due, (vii) no reportable event,
as described in Section 4043 of ERISA, has occurred with respect to any such
plan which has not been reported as required, (viii) no excise taxes are payable
under the Code and (ix) no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made.
(3) All costs of any plans subject to Title IV of ERISA have
been provided for on the basis of consistent methods in accordance with sound
actuarial assumptions and practices. SCHEDULE 2.17(C) includes for each such
plan (other than union multiemployer plans), as of its last valuation date, the
amount by which its assets exceeded (or were less than) its "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA). Since the
last valuation date for each such plan, there has been no amendment or change to
such plan that would increase the amount of benefits thereunder and, there has
been no event or occurrence that would cause the excess of assets over benefit
liabilities as listed in SCHEDULE 2.17(C) to be reduced or the amount by which
benefit liabilities exceed assets as listed in SCHEDULE 2.17(C) to be increased.
(4) In addition to the documents listed in subsection (b)(3)
above, Seller has delivered to Buyer for each Title IV plan copies of the
following documents: (i) the Form PBGC-1 filed in each of the most recent
three plan years, and (ii) the actuarial report as of the last valuation date.
Each such actuarial report fairly presents the financial condition and the
results of operations of each such plan as of such date, in accordance with
GAAP.
(d) MULTIEMPLOYER PENSION PLANS.
(1) SCHEDULE 2.17(D) lists all pension plans in SCHEDULE
2.17, SCHEDULE 2.17(B) and SCHEDULE 2.17(C) and all Past Plans that are, in each
case, also multiemployer plans within the meaning of Section 3(37) of ERISA.
(2) With respect to each such multiemployer plan in which the
Company, any Subsidiary or any ERISA Affiliate participates or, at any time
within the past seven (7) years, has participated, (i) neither the Company nor
any Subsidiary nor any ERISA Affiliate has withdrawn, partially withdrawn, or
received any notice of any claim or demand for withdrawal liability or partial
withdrawal liability, (ii) neither the Company nor any Subsidiary nor any ERISA
Affiliate has received any notice that any such plan is in reorganization, that
34
increased contributions may be required to avoid a reduction in plan benefits or
the imposition of any excise tax, or that any such plan is or may become
insolvent, (iii) neither the Company, nor any Subsidiary nor any ERISA Affiliate
has failed to make any required contributions, (iv) to the best knowledge of the
Company, no such plan is a party to any pending merger or asset or liability
transfer, (v) to the best knowledge of the Company, there are no PBGC
proceedings against or affecting any such plan and (vi) neither the Company nor
any Subsidiary nor any ERISA Affiliate has (or may have as a result of the
transactions contemplated hereby) any withdrawal liability by reason of a sale
of assets pursuant to section 4204 of ERISA.
(3) SCHEDULE 2.17(D) includes for each multiemployer plan, as
of its most recent valuation date, the amount of potential withdrawal liability
of the Company, Subsidiaries and ERISA Affiliates, calculated according to the
information made available pursuant to ERISA Section 4221(e), and identifies the
specific obligor. To the best knowledge of the Company, nothing has occurred or
is expected to occur that would materially increase the amount of the total
potential withdrawal liability of a specified obligor for any such plan over the
amount shown in SCHEDULE 2.17(D).
(e) HEALTH PLANS. All group health plans of the Company, any
Subsidiary and any ERISA Affiliate have been operated in material compliance
with the group health plan continuation coverage requirements of Section 4980B
of the Code and Sections 601 to 606 of ERISA, and the portability and coverage
crediting requirements of Sections 701 to 702 of ERISA, to the extent such
requirements are applicable. This representation does not include any
non-compliance resulting from the U.S. Supreme Court decision in GEISSAL X.
XXXXX MEDICAL CORP. (1998).
(f) FINES AND PENALTIES. There has been no act or omission by the
Company or any Subsidiary or any ERISA Affiliate that has given rise to or may
give rise to fines, penalties, taxes, or related charges under Section 502(c),
(i) or (l) or Section 4071 of ERISA or Chapter 43 of the Code.
2.18 CERTAIN INTERESTS. No Affiliate of Seller, the Company or any
Subsidiary nor any officer or director of any of them, nor any Associate of any
such individual, has any material interest in any property used in or pertaining
to the Business; no such Person is indebted or otherwise obligated to the
Company or any Subsidiary; and neither the Company nor any Subsidiary is
indebted or otherwise obligated to any such Person, except for amounts due under
normal arrangements applicable to all employees generally as to salary or
reimbursement of ordinary business expenses not unusual in amount or
significance (other than employment severance payment obligations, which
liabilities appear in the Seller's Disclosure Schedule and will be fully
reflected in the Closing Balance Sheet). Except as disclosed in Seller's
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (either alone, or upon the occurrence of any act or event, or
with the lapse of time, or both) result in any benefit or payment (severance or
other) arising or becoming due from the Company or any Subsidiary or the
successor or assign of any thereof to any Person (other than the employment
severance payments referred to above).
2.19 INTERCOMPANY TRANSACTIONS; TRANSACTIONS WITH SELLING
STOCKHOLDERS AND THEIR AFFILIATES. At the Closing Date, there will be no
outstanding (i) loans or other extensions of credit made or guaranteed by the
Company or any Subsidiary to or for the benefit of any
35
Selling Stockholder or any director, officer, employee, trustee or personal
representative of any Selling Stockholder, or of the Company or any Subsidiary,
or any Associate of any of the foregoing and (ii) loans, guarantees or other
extensions of credit of any amount made to or for the benefit of Seller or any
such Affiliate or Associate of Seller, except as to clauses (i) and (ii) for any
such transactions solely between the Company and a Subsidiary of the Company.
Except as disclosed in SCHEDULE 2.19, at the Closing Date, neither Buyer, the
Company nor any of its Subsidiaries shall have any continuing commitment,
obligation or liability of any kind with respect to the persons referred to in
clauses (i) and (ii) above and none of Seller or such Affiliates or Associates
will have any obligations to the Company or any Subsidiary.
2.20 BANK ACCOUNTS, POWERS, ETC. SCHEDULE 2.20 lists each bank,
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which the Company or any Subsidiary has an account or
safe deposit box and the names and identification of all Persons authorized to
draw thereon or to have access thereto, and lists the names of each Person
holding powers of attorney or agency authority from the Company or any
Subsidiary and a summary of the terms thereof.
2.21 NO BROKERS OR FINDERS. No agent, broker, finder, or investment
or commercial banker, or other Person or firm engaged by or acting on behalf of
Seller, the Company or any Subsidiary or any of their respective Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transactions other than Macadam Capital Partners, as to which
the Company shall pay in full prior to the Closing (and which payment shall be
reflected as paid in the Closing Balance Sheet) and neither Buyer, Western, nor
any Subsidiary (nor the Company post-Closing) shall have any liability.
2.22 ACCURACY OF INFORMATION. None of the written information
supplied or to be supplied by Seller, the Company or any Subsidiary (or on
behalf of any of the foregoing by Macadam Capital Partners or counsel to the
Company) (a) to any Person for inclusion in any document or application filed
with any Governmental Entity having jurisdiction over or in connection with the
transactions contemplated by this Agreement or (b) to Buyer or Western any of
their agents or representatives in connection with these transactions, this
Agreement or the negotiations leading up to this Agreement did contain, or at
the respective times such information is or will be delivered, will contain any
untrue statement of a material fact, or omitted or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If any of such information at any time subsequent to delivery
and prior to Closing becomes untrue or misleading, in any material respect, the
Company will promptly notify Buyer in writing of such fact and the reason for
such change. All documents required to be filed by Seller, the Company or any
Subsidiary with any Governmental Entity in connection with this Agreement or the
transactions contemplated by this Agreement will comply in all material respects
with the provisions of applicable Law. The Seller's Disclosure Schedule
contains, without limitation, all of the exceptions known to the President (Xxxx
Xxxxx) and the Property Manager (Xxxxxx Xxxxxxx) of the Company.
2.23 INVENTORIES. All inventories of the Company and each Subsidiary
are of good and merchantable quality, reasonably in balance, and salable (in the
case of inventory held
36
for sale) or currently usable (in the case of other inventory) in the ordinary
course of business. The value of obsolete or damaged inventory and of inventory
below standard quality has been written-down on the most recent balance sheet
delivered to Buyer pursuant to Section 2.4 or, with respect to inventories
purchased since such balance sheet date, on the books and records of the
Company, to ascertainable market value, or adequate reserves described on such
balance sheet have been provided therefor, and the value at which inventories
are carried reflects the customary inventory valuation policy of the Company and
its Subsidiaries (which fairly reflects the value of obsolete, spoiled or excess
inventory) for stating inventory, in accordance with GAAP consistently applied.
2.24 RECEIVABLES. All receivables of the Company and its
Subsidiaries, whether reflected on the balance sheet or otherwise, represent
sales or loans actually made in the ordinary course of business, and are current
and fully collectible net of any reserves shown on the balance sheet (which
reserves are adequate and were calculated on a basis consistent with GAAP and
past practices). A complete and accurate aging list of all receivables of the
Company and each Subsidiary is set forth in SCHEDULE 2.24.
2.25 SUPPLIERS. SCHEDULE 2.25 lists the names of and describes all
Contracts with and the appropriate percentage of Business attributable to, the
ten (10) most significant suppliers of the Business at the date of this
Agreement, and any sole-source suppliers of significant goods or services (other
than electricity, gas, telephone or water) to the Company or any Subsidiary with
respect to which alternative sources of supply are not readily available on
comparable terms and conditions.
2.26 BANKRUPTCY. None of (a) the Selling Stockholders or (b) to the
best knowledge of the Company, any lessor or lessee under any Lease or (c) to
the best knowledge of the Company, any supplier of the Company listed on
SCHEDULE 2.25 has undertaken or is threatening bankruptcy or financial
restructuring or reorganization.
2.27 SETTLEMENT AGREEMENT. There has been no breach or default
under, or actions or threats of action in connection with, the Settlement
Agreement or under or in connection with any related agreements or
understandings.
2.28 REVIEW OF THIS AGREEMENT. The representations and warranties of
the Company in this Agreement that are qualified as being made to the Company's
knowledge are based on the review by each of Xxxx Xxxxx and Xxxxxx Xxxxxxx, and
each of them has reported to the Company that to the best of his knowledge all
of the representations and warranties of the Company contained in this Agreement
are true and correct as of the date of this Agreement. The Company represents
and warrants that, of the persons currently employed by the Company, each of
Messrs. Xxxxx and Griguhn, are the individuals most likely to know of the truth
and accuracy of each such representation and warranty.
2.29 CERTIFICATES. Any Certificate required by this Agreement signed
by an officer of the Company and delivered to Buyer or to counsel to Buyer shall
be deemed to be a representation and warranty by the Company as to the matters
set forth therein, solely for the benefit of Buyer and Western.
37
2.30 CERTAIN TAX MATTERS.
(a) NO TAX LIABILITY. Except as reserved in the line item "taxes"
on the Final Closing Balance Sheet, (i) there is no, and there will be no, Tax
payable by or on behalf of the Company or any of the Subsidiaries for any
taxable period ending on or prior to the Closing Date, (ii) there are no, and
there will be no, deficiencies in any Tax payable by or on behalf of the Company
or any of the Subsidiaries arising from any audit by any taxing agency or
authority with respect to any period ending on or prior to the Closing Date,
(iii) there are no, and there will be no, Taxes of any member of a consolidated
or combined tax group of which Seller or any of its Affiliates is, or was at any
time, a member, for which the Company and/or any Subsidiary is jointly or
severally liable as a result of its inclusion in such group, and (iv) there is
no, and there will be no, claim or demand for reimbursement or indemnification
resulting from any transfer by Seller or the Company prior to the Closing of any
Tax benefits or credits to any other person. With respect to any Taxes
attributable to pre-Closing operations and due for Tax periods ending after the
Closing Date, the Company represents and warrants that the line item "taxes" on
the Final Closing Balance Sheet shall include an income tax accrual, calculated
as if the period ended on the Closing Date.
(b) AUDIT MATTERS. The Representative shall have the responsibility
for, and the right to control, at Seller's expense, the audit (and disposition
thereof) of any Tax Return relating to periods ending on or prior to the Closing
Date and to participate in the disposition of the audit of any Tax Return
relating to the periods ending after the Closing Date, in each case if such
audit or disposition thereof could give rise to a claim against Seller
hereunder; PROVIDED, HOWEVER, that if such claim against Seller could reasonably
be expected to be substantially in excess of the liability cap referred to in
Section 9.10(b) of this Agreement, the Company may refuse to allow the
Representative to have such responsibility and control; PROVIDED, FURTHER, that
the Representative may not enter into any settlement of any such audit without
the Company's consent, which will not be unreasonably withheld. Buyer shall
have the right directly or through its designated representatives, to review in
advance and comment upon all submissions made in the course of audits or appeals
thereof to any Governmental Entity relating to periods ending on or prior to the
Closing Date and to approve the disposition of any audit adjustment with respect
to such periods if such disposition will or might reasonably be expected to
result in an increase in Taxes of Buyer, the Company or any Subsidiary for any
period beginning at or after the Closing or as to which the Company and/or any
Subsidiary is jointly or severally liable as a result of its inclusion in such
group prior to the Closing Date.
2.31 WARN ACT. Each of the Company's single sites of employment (as
defined under the Worker Adjustment and Retraining Notification Act (the "WARN
Act")) employs fewer than fifty (50) non-part time employees (as defined under
the WARN Act).
2.32 UNANTICIPATED LIABILITIES. With respect only to matters that
are not the subject of one of the foregoing representations and warranties,
neither the Company nor any Subsidiary has any liabilities of any nature
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due, probable of assertion or not) not covered by insurance arising out
of Losses or injuries occurring prior to the Closing, except as shall be fully
reflected on the Final Closing Balance Sheet.
38
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND WESTERN
Except as otherwise indicated on Schedule 3.0 ("Buyer's Disclosure
Schedule"), Buyer and Western, jointly and severally, represent, warrant and
agree as follows:
3.1 ORGANIZATION AND RELATED MATTERS. Each of Buyer and Western has
been duly organized and is validly existing and in good standing under the Laws
of the state of California with corporate or trust power and authority, as
applicable, to own its properties and conduct its business as now conducted, and
to execute, deliver and perform this Agreement and any related agreements to
which it is a party. At the Closing Date, Buyer will be qualified to do
business under the Laws of the State of Oregon. If any Selling Stockholder
makes a DownREIT Election, on the Closing Date the DownREIT will be a duly and
recently formed and validly existing limited partnership under the Laws of the
State of Delaware with the power under the Delaware Revised Uniform Limited
Partnership Act and its Partnership Agreement to own its property and assets and
to perform its obligations as contemplated by this Agreement, and will be
registered as a foreign limited partnership to transact intrastate business in
California and will be qualified to do business in the State of Oregon.
3.2 DOWNREIT INTERESTS. If any Selling Stockholder makes a DownREIT
Election: (a) immediately prior to the Closing the DownREIT will have no general
partner other than Western and will have one limited partner with no more that
the minimum nominal interest necessary to create a limited partnership under
Delaware law; (b) at the Closing such limited partner shall withdraw and each
Electing Stockholder, upon execution of the Partnership Agreement, shall own the
limited partnership interest represented by its DownREIT Units free of any
Encumbrance; (c) at the Closing, the DownREIT will have no outstanding Contracts
or other rights to subscribe for or purchase, or Contracts or other obligations
to issue or grant any rights to acquire, any partnership interests in, or to
restructure or recapitalize, the DownREIT, other than its obligations to the
Electing Stockholders; (d) at the Closing, there will be no outstanding
Contracts of DownREIT to repurchase, redeem or otherwise acquire any partnership
interests in the DownREIT other than as set forth in the Partnership Agreement
and applicable Delaware law; (e) upon consummation of the Closing, all DownREIT
Units will have been duly authorized and validly issued and will have been
issued in conformity with all applicable Laws. There are no preemptive rights
in respect of any partnership interests in the DownREIT, other than as set forth
in the Partnership Agreement; and (f) upon consummation of the Closing, without
exception, each Electing Stockholder will acquire from the DownREIT legal and
beneficial ownership of and all right to vote (to the extent permitted under the
Partnership Agreement) the DownREIT Units to be issued to each Electing
Stockholder by the DownREIT in exchange for such Electing Stockholder's Stock,
free and clear of all covenants, conditions, security interests, mortgages,
pledges, lieu encumbrances or other Encumbrances other than those set forth in
the Partnership Agreement.
3.3 DOWNREIT'S CONTRIBUTED PROPERTIES. Except in each case as Buyer
and the Electing Stockholders may otherwise agree in writing, upon the
contribution of property (the "Contributed Property") by Western or Buyer to the
DownREIT pursuant to the agreement referred to in Section 1.5(c)(iii) at the
Closing: (a) the DownREIT will have good and marketable title to, free of
Encumbrances, all items of real property constituting any part of the
Contributed Property, including fees, leaseholds and all other interests in real
property, and such other assets
39
and properties that are material to the business conducted on such real
property, except for (i) Encumbrances consisting of liens for Taxes not yet due,
and (ii) assets and properties not material to such business that were disposed
of since the date of such agreement in the ordinary course of business; (b) all
material tangible properties that are any part of the Contributed Property will
be in a good state of maintenance and repair (except for ordinary wear and tear)
and adequate for the business conducted on the Contributed Property; (c) all
material leasehold properties to be held by the DownREIT as lessee as any part
of the Contributed Property will be held under valid, binding and enforceable
leases, subject only to such exceptions as are not, individually or in the
aggregate, material to the business to be conducted thereon; (d) there will be
no pending or, to the best knowledge of Buyer and Western, threatened Action
that would materially interfere with the quiet enjoyment of any such leasehold
by the DownREIT.
3.4 AUTHORIZATION. The execution, delivery and performance of this
Agreement and any related agreements by Buyer and Western has been duly and
validly authorized by the Board of Directors of Buyer and the Board of Trustees
of Western, respectively, and by all other necessary corporate and trust action,
respectively, on the part of Buyer and Western. This Agreement constitutes the
legal, valid and binding obligation of Buyer and Western, enforceable against
Buyer and Western in accordance with its terms except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar Laws and equitable principles relating to or limiting creditors' rights
generally.
3.5 PERMITS AND APPROVALS. SCHEDULE 3.5 lists all Permits and
Approvals required to be obtained by Buyer or Western to consummate this
Agreement. Except for matters identified in SCHEDULE 3.5 as requiring that
certain actions be taken by or with respect to a third-party or Governmental
Entity, the execution and delivery of this Agreement by Seller and the
performance of this Agreement and any related or contemplated transactions by
Seller, the Company or any Subsidiary will not require filing or registration
with, or the issuance of any Permit by, any other third-party or Governmental
Entity.
3.6 NO CONFLICTS. The execution, delivery and performance of this
Agreement and any related agreements by Buyer and Western will not violate the
provisions of, or constitute a breach or default whether upon lapse of time
and/or the occurrence of any act or event or otherwise under (a) the charter
documents or bylaws of Buyer or Western, (b) any Law to which Buyer or Western
is subject or (c) any Contract to which Buyer or Western is a party that is
material to the financial condition, results of operations or conduct of the
business of Buyer or Western, PROVIDED (as to clauses (b) and (c) respectively)
that the appropriate regulatory approvals, listed in SCHEDULE 3.5, are received
and specified consents, if any, listed in SCHEDULE 3.5 are secured.
3.7 NO BROKERS OR FINDERS. No agent, broker, finder or investment
or commercial banker, or other Person or firms engaged by or acting on behalf of
Buyer or its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fees or
other commissions as a result of this Agreement or such transactions.
3.8 LEGAL PROCEEDINGS. There is no Order or Action pending or to
the best knowledge of Buyer or Western, threatened against or affecting Buyer or
Western that individually or when aggregated with one or more other Actions has
or might reasonably be
40
expected to have a material adverse effect on the ability of Buyer or Western to
perform this Agreement.
3.9 ACCURACY OF INFORMATION. None of the information supplied or to
be supplied by or on behalf of Buyer or Western (a) to any Person for inclusion
in any document or application filed with any Governmental Entity having
jurisdiction over or in connection with the transactions contemplated by this
Agreement or (b) to Seller or the Company or any of their agents or
representatives in connection with these transactions, this Agreement or the
negotiations leading up to this Agreement did contain, or at the respective
times such information is or was delivered, will contain any untrue statement of
a material fact, or omitted or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If any of such
information at any time subsequent to delivery and prior to Closing becomes
untrue or misleading, in any material respect, the Buyer or Western will
promptly notify Buyer in writing of such fact and the reason for such change.
All documents required to be filed by Buyer or Western with any Governmental
Entity in connection with this Agreement or the transactions contemplated by
this Agreement will comply in all material respects with the provisions of
applicable Law.
3.10 AVAILABILITY OF PURCHASE PRICE. Upon payment of the Purchase
Price as contemplated by this Agreement, each of Western, DownREIT, Buyer and
the Company shall be Solvent. As used herein, the term "Solvent" means, with
respect to any entity on a particular date, that on such date (a) the fair
market value of the assets of such entity is greater than the total amount of
liabilities (including contingent liabilities) of such entity, (b) the present
fair salable value of the assets of such entity is greater than the amount that
will be required to pay the probable liabilities of such entity on its debts as
they become absolute and matured, (c) such entity is able to realize upon its
assets and pay its debts and other liabilities, including contingent
obligations, as they mature, and (d) such entity does not have unreasonably
small capital.
ARTICLE 4
DUE DILIGENCE
4.1 DUE DILIGENCE CONDITIONS PRECEDENT. It is a condition to the
obligation of Buyer to acquire the Stock from Seller that each of the following
events (each a "Due Diligence Condition Precedent") shall have occurred (or been
waived by Buyer in writing) on or prior to the final day of the Due Diligence
Period:
(a) PHYSICAL CONDITION OF THE PROPERTY. Buyer shall have reviewed
and approved, in writing, the physical condition of each Property, including,
without limitation, all mechanical, utility, structural and electrical systems;
roofs and parking lots; ground water and soil cores; any soils and substrata
reports and materials (such soils and substrata reports and materials are
collectively referred to as the "Soils Reports"); and any seismic and flood
plain reports and materials, including, without limitation, any reports or maps
of the Federal Emergency Management Agency.
(b) RENT ROLL. Buyer shall have reviewed and approved, in writing,
a current Rent Roll (organized by Property) delivered by the Company to Buyer
prior to the end of the Due
41
Diligence Period, prepared and certified by the Company as true, correct and
complete in the form of SCHEDULE 2.7(A)(V) attached to this Agreement (but
updated to the date of delivery) (the "Certified Rent Roll").
(c) LEASE REVIEW. Buyer shall have reviewed and approved, in
writing, (A) copies of all Leases (organized by Property), including, without
limitation, all amendments and modifications thereof, all lease guaranty
agreements pursuant to which the guarantors thereunder guaranty tenants'
obligations under the relevant Leases (the "Lease Guaranties"), and (B) all
available summaries of the rental rates and material terms of all pending and
unexecuted leases affecting the Property certified by the Company and Seller as
true, correct and complete, and all available information regarding any
inducements to lease, including, without limitation, any rental concessions, all
standard lease forms in use at the Property (the "Standard Lease Forms"); all
tenant correspondence files (the "Tenant Correspondence"); and to the extent
available to the Company, current financial statements of each Tenant under any
Tenant Lease and any other credit information regarding the tenants that is in
the Company's possession or control (the "Tenant Financial Statements").
(d) BUDGET. Buyer shall have reviewed and approved, in writing, all
available current budgets and any available future budgets showing projected
income and expenses for the Company and each of the Properties (the "Budgets").
(e) CURRENT PRELIMINARY TITLE REPORTS. Buyer shall have reviewed
and approved, in writing, (i) current updated preliminary title reports for the
Land (the "Title Reports"), prepared by First American Title Company of Oregon,
having offices in Portland and Medford, Oregon, or such other title company
selected by Buyer (the "Title Company"), (ii) together with all documents
supporting exceptions to title.
(f) TITLE POLICIES. Buyer shall have reviewed and approved, in
writing, the Company's existing policies of title insurance applicable to each
Property (the "Title Policies").
(g) PROJECT PLANS. Buyer shall have reviewed and approved, in
writing, all available, current, as-built plans and specifications for the
Improvements applicable to each Property (the "Project Plans").
(h) SURVEY. Buyer shall have reviewed and approved, in writing, an
ALTA/ACSM Land Title Survey of each Property (the "Survey"), which Buyer shall
cause to be prepared. The expense of such preparation shall be paid by Buyer.
The Survey shall be prepared and certified in accordance with Buyer's standard
specifications set forth in EXHIBIT E attached to this Agreement (the
"Surveyor's Certification and Specifications").
(i) TENANT'S ESTOPPEL CERTIFICATES. Buyer shall have reviewed and
approved, in writing, the estoppel certificates executed by each of the tenants
at the Property, each substantially in the form of EXHIBIT F attached to this
Agreement, modified as Buyer deems appropriate to reflect the review by Buyer of
the Leases, or, if the Company after using best efforts is unable to procure
such certificates, substitute certificates at Buyer's request, executed by the
Company (as so procured or substituted, the "Tenant's Estoppel Certificates").
42
(j) LESSOR'S ESTOPPEL CERTIFICATES. Buyer shall have reviewed and
approved, in writing, the estoppel certificates executed by each of the lessors
at the Leasehold property, each substantially in the form of EXHIBIT G attached
to this Agreement but modified as Buyer deems appropriate to reflect the review
by Buyer of the applicable leases, or, if the Company after using best efforts
is unable to procure such certificates, substitute certificates at Buyer's
request, executed by the Company (as so procured or substituted, the "Lessor's
Estoppel Certificates"). The substitute certificates referred to in this
subsection (j) and the immediately preceding subsection (i) shall be deemed to
be a representation and warranty of Company to Buyer as to the matters set forth
therein, PROVIDED, HOWEVER, that paragraph 10 of such certificate shall be
deemed to conclude with the additional qualifier "and except as disclosed in
Seller's Disclosure Schedule and except as disclosed with specificity (as to
nature and quantity) in (a) the environmental reports referenced in Seller's
Disclosure Schedule or (b) the environmental reports prepared for Buyer or
Western by an environmental consultant under contract with Buyer or Western and
delivered to Buyer or Western prior to the end of the Due Diligence Period."
(k) RESTRICTIONS. Buyer shall have reviewed and approved, in
writing, any recorded or unrecorded documents evidencing any restrictions
affecting the development, use or operation of the Property, including, without
limitation, conditional use permits, special use permits, variances and
licenses.
(l) COLLECTIVE BARGAINING AGREEMENTS. Buyer shall have reviewed and
approved, in writing, all collective bargaining agreements to which the Company
is a party or is bound.
(m) EMPLOYEE BENEFIT PLANS. Buyer shall have reviewed and approved,
in writing, all of the Company's employee benefit plans, including, without
limitation, the plans referred to in Section 2.17 of this Agreement.
(n) OTHER DOCUMENTS. Buyer shall have reviewed and approved, in
writing, all of the following documents (in each case, if any) in the Company's
possession or control: maintenance contracts; utility permits and contracts;
construction and building permits; licenses; operating contracts; certificates
of occupancy respecting the shell of the Improvements and, if applicable, the
tenant improvements therein (the "Certificates of Occupancy"); management and
leasing agreements; service contracts; structural calculations, if any; any
approved site plans, engineering reports and approved plans, landscape plans,
tenant improvement plans and floor plans; any and all other materials respecting
the development, development approval, construction and construction approval at
the Property; reports of insurance carriers insuring the Property during the
last five (5) years respecting the claims history of the Property; insurance
certificates of Company and tenants respecting the Property; all correspondence,
reports, and notices pertaining to the existence of toxic or hazardous materials
and/or waste at the Property; all permits, reports, certificates and notices
pertaining to the existence, removal and/or decommission of any and all storage
tanks located on, at or underneath the Property; any existing photographs of the
Property reasonably requested by Buyer, including, without limitation, aerial
photographs of the Property; all brokerage and commission agreements; all
current rental agreements; all agreements entered by Company, Seller and any of
their affiliates affecting the Property and/or income and cash flow to be
received from the Property that will survive the Closing; tax bills and
assessments for the current year and the three (3) year period immediately
preceding the current year; all warranties pertaining to the Property,
including, without limitation, warranties and
43
guaranties respecting the base building improvements, tenant improvements, roofs
and mechanical systems and parking lots (the "Warranties"); all information and
documentation respecting any proposed or approved roadways that are at or near,
or that affect, the Property; copies of all sales volume reports submitted to
the Company by tenants at the Property for the last three (3) years; a summary
of all outstanding accounts receivable relating to or in connection with the
Property; copies of all pleadings respecting any litigation or administrative
actions pertaining to the Property during the last ten (10) years; all written
reports respecting incidents of theft, burglary or crimes (other than xxxxx
crimes such as shoplifting or employee shrinkage occurring in the ordinary
course) attempted or committed at, on or to the Property or other such incidents
which are the subject of litigation during the last ten (10) years; and such
other information specifically and reasonably requested by Buyer of Seller or
the Company in writing during the Due Diligence Period.
(o) UNEXPIRED CONCESSIONS. Buyer shall have confirmed its
satisfaction in writing that there exists no unpaid leasing commissions with
respect to leased premises at the Property or unexpired free rent or expense
concessions of any type whatsoever (including, without limitation, any free rent
provisions, operating expense abatements, moving expense reimbursements, tenant
improvement allowances or unsatisfied construction obligations of the Company)
(collectively, the "Unexpired Concessions") remaining in any of the Leases,
other than as specifically set forth on the Rent Roll.
(p) ENVIRONMENTAL REPORTS. Buyer shall have reviewed and
approved, in writing, the environmental reports referred to in Section 2.7(k).
(q) ESTIMATED CLOSING BALANCE SHEET. Buyer shall have reviewed and
approved, in writing, the Estimated Closing Balance Sheet.
(r) SUPPLEMENTAL DISCLOSURE SCHEDULE. Buyer shall have reviewed and
approved, in writing, the Supplemental Disclosure Schedule (as defined below).
4.2 SELLER'S ACKNOWLEDGMENT. Seller acknowledges that each of the
approvals and confirmations of Buyer listed in Section 4.1 may be given or
withheld by Buyer in its sole good faith discretion.
ARTICLE 5
COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY
AND ITS SUBSIDIARIES PRIOR TO CLOSING
AND CERTAIN OTHER MATTERS
5.1 ACCESS.
(a) GENERALLY. The Company shall, and shall cause its Subsidiaries
to, authorize and permit Buyer and its representatives (which term shall be
deemed to include its Buyer's Accountants and counsel and representatives of any
prospective financing institutions of Buyer or Western):
44
(i) PHYSICAL ACCESS. Subject to existing confidentiality and
document return commitments, to have reasonable access during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of their respective businesses and
employee relationships, to all of their respective properties, books,
records, operating instructions and procedures, Tax Returns and all other
information with respect to the Business as Buyer may from time to time
request (including, without limitation, each of the due diligence items
referred to in Section 4.1), and to make copies of any such books, records
and other documents.
(ii) INTERVIEWS. Upon advance notice to the President of the
Company, to interview such Persons (including, without limitation, the
respective directors, officers, employees, accountants, counsel, suppliers,
customers, and creditors, of the Company, its Subsidiaries and the Tenants)
as Buyer considers necessary or appropriate for the purposes of
familiarizing itself with the Business, properties and assets of the
Company and its Subsidiaries, obtaining any necessary Approvals of or
Permits for the transactions contemplated by this Agreement and conducting
an evaluation of the organization and Business of the Company and its
Subsidiaries.
(b) SPECIFIC AUTHORIZATION. Without limiting the generality of the
foregoing and subject to the provisions of the Leases, the Company shall
authorize Buyer, and Buyer's agents, representatives, designees and contractors,
to do the following during the Due Diligence Period: (i) enter and inspect the
Property and all mechanical and utility systems, records and documents,
including financial records, for the Property as reasonably required by Buyer to
complete its due diligence review; (ii) enter the Property in order to conduct
an assessment of the environmental condition of the Property, including taking
ground water and soil cores; (iii) upon advance notice to the President of the
Company, interview tenants and lessors at the Property; (iv) contact the
property and public liability insurance carriers who have insured the Property
since the Property was placed in service regarding the claims history of the
Property; (v) upon advance notice to the President of the Company, interview
employees of the Company and its Subsidiaries (and the Company agrees to use
commercially reasonable efforts to make such employees available to Buyer for
purposes of such interviews); and (vi) undertake such other investigations in
furtherance of Buyer's due diligence review of the Property as Buyer reasonably
deems appropriate. With respect to any physical entry onto the Property by
Buyer during the Due Diligence Period, Buyer shall indemnify, defend and hold
the Company harmless from and against any and all loss, cost or liability caused
by Buyer's negligence or willful misconduct in the inspection of the Property
during the Due Diligence Period.
(c) FINANCIAL ACCESS. Company shall, and shall cause its
Subsidiaries to, allow Buyer and Buyer's Accountants access to such records,
working papers, physical inventory and any other items as they may reasonably
request for the purpose of verifying the results obtained and financial
statements produced by Company's Accountants and Previous Accountants.
5.2 NOTICE OF BOARD MEETINGS. Seller and the Company agree to
provide Buyer with notice of all meetings of the Company and/or its
Subsidiaries' respective boards of directors occurring after the First Deposit
Date and to deliver concurrently to Buyer copies of all materials distributed to
members of their respective boards of directors in connection with such
meetings, it being understood that the Company may redact information relating
to this transaction.
45
5.3 SPECIFIC DELIVERIES. The Company shall use its best efforts to
deliver to Buyer or to make available for inspection by Buyer, in each case on
or prior to the date of this Agreement (except in the case of the Tenant's
Estoppel Certificates and the Lessor's Estoppel Certificates and any related
substitute certificates, which shall be delivered no later than the final day of
the Due Diligence Period):
(a) ESTIMATED CLOSING BALANCE SHEET. The Estimated Closing Balance
Sheet (which delivery shall be made no later than the seventh day prior to the
First Deposit Date).
(b) CHARTER DOCUMENTS. True, correct and complete copies of the
respective charter documents of the Company and the Subsidiaries as in effect on
the date of delivery, certified as of a recent date by the secretary of state of
the jurisdiction of formation (and the Company shall further deliver certified
copies of any amendments or supplements thereto through the Closing Date).
(c) MINUTE BOOKS. True, correct and complete copies of the Minute
Books.
(d) STOCK RECORD BOOKS. True, correct and complete copies of the
Stock Record Books.
(e) TAX RETURNS. To the extent in the Company's possession or
available from the Internal Revenue Service, every tax return filed by or on
behalf of the Company or its predecessors since 1913; and any available
financial statements for years in which tax returns are not so available.
(f) SUBSIDIARIES' FINANCIAL STATEMENTS. To the extent available,
(unconsolidated) balance sheets for the Company and each of the Subsidiaries at
fiscal year-end 1997, 1996 and 1995 and the related consolidated and
consolidating statements of operations, changes in stockholder's equity and
changes in financial position or cash flow for the years then ended; and interim
(unconsolidated) balance sheets for the Company and each of the Subsidiaries at
first fiscal quarter-end, 1998 and 1997 (and when and if available, for second
fiscal quarter-end 1998 and 1997) and the related consolidated and consolidating
statements of operations, changes in stockholder's equity and changes in
financial position or cash flow for the periods then ended.
(g) MATERIAL CONTRACTS. True, correct and complete copies of the
agreements appearing on SCHEDULE 2.6, including all amendments and supplements
thereto through the Closing Date.
(h) ENVIRONMENTAL REPORTS. Copies of all of the Environmental
Reports referred to in SECTION 2.7(K)(A).
(i) INSURANCE POLICIES. Copies of all of the insurance policies and
Bonds listed in SCHEDULE 2.13.
(j) CERTIFIED RENT ROLL. The certified Rent Roll.
(k) LEASES. Copies of all of the Leases.
46
(l) LEASE GUARANTIES. Copies of all of the Lease Guaranties.
(m) TENANT CORRESPONDENCE. Copies of all of the Tenant
Correspondence.
(n) TENANT FINANCIAL STATEMENTS. If available, the Tenant Financial
Statements for each Tenant under a Tenant Lease, including statements for such
Tenant's most recently ended fiscal year and interim periods subsequent thereto.
(o) BUDGET. If available, the Company shall deliver to Buyer copies
of the Budgets.
(p) TITLE REPORTS. Copies of current, updated, preliminary Title
Reports.
(q) TITLE POLICIES. Copies of the Title Policies.
(r) PROJECT PLANS. If available, copies of all of the Project
Plans.
(s) [RESERVED]
(t) TENANT'S ESTOPPEL CERTIFICATES. Originally executed Tenant's
Estoppel Certificates from each of the Tenants under the Tenant Leases;
PROVIDED, HOWEVER, that if the Company, after using its best efforts to procure
such certificates from such Tenants, is unable to procure such certificates, the
Company shall, at Buyer's request, execute a substitute certificate.
(u) LESSOR'S ESTOPPEL CERTIFICATES. Originally executed Lessor's
Estoppel Certificates from each Lessor of each Leasehold; PROVIDED, HOWEVER,
that if the Company, after using its best efforts to procure such certificates
from such Lessors, is unable to procure such certificates, the Company shall, at
Buyer's request, execute a substitute certificate.
(v) CERTIFICATES OF OCCUPANCY. Copies of all of the Certificates of
Occupancy, if any and if available.
(w) WARRANTIES. Copies of all of the Warranties, if any and if
available.
(x) SUPPLEMENTAL SELLER'S DISCLOSURE SCHEDULE. A supplemental
disclosure schedule (the "Supplemental Disclosure Schedule") showing all changes
to the Seller's Disclosure Schedule necessary to reflect events occurring after
the date of this Agreement through the Closing, and to correct any inaccuracies
in the Seller's Disclosure Schedule attached to this Agreement. Nonetheless,
the Supplemental Disclosure Schedule shall not be deemed to amend the Seller's
Disclosure Schedule as attached to this Agreement (unless Buyer so agrees in
writing). The Company shall update the Supplemental Disclosure Schedule from
time to time during the Due Diligence Period as the relevant facts and
circumstances change materially or at Buyer's reasonable request.
(y) OTHER REQUESTS. Each and every document that Buyer has
heretofore reasonably requested in writing in connection with its due diligence
review.
47
5.4 MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS.
(a) NOTICE. Seller and the Company will promptly notify Buyer of
any event of which Seller or the Company obtains knowledge which has had or
might reasonably be expected to have a material adverse effect on the Business
or which if known as of the date of this Agreement would have been required to
be disclosed to Buyer.
(b) DELIVERY OF REPORTS. Seller and the Company will deliver to
Buyer (i) commencing after the First Deposit Date, as soon as available, and in
any event within three (3) days after it is presented to the board of directors,
any report by the Company or any of its Subsidiaries for submission to its board
of directors and the working papers related thereto and other operating or
financial reports (including any projections prepared for management of any of
their respective businesses and the working papers related thereto), it being
understood that the Company may redact information relating to this transaction,
(ii) notice of and, unless good reason exists not to do so, as soon as
available, copies of all portions of all reports, renewals, filings,
certificates, statements and other documents filed with any Governmental Entity,
and (iii) monthly and quarterly unaudited consolidated and consolidating balance
sheets, statements of operations and cash flow and changes in stockholder's
equity for the Company, (iv) monthly and quarterly unaudited consolidated and
consolidating balance sheets, statements of operations and cash flow and changes
in stockholder's equity for each of the Subsidiaries and (v) such other reports
as Buyer may reasonably request relating to the Company and its Subsidiaries.
Each of the financial statements delivered pursuant to this Section 5.4(b) shall
be prepared in accordance with GAAP consistently applied during the periods
covered (except as disclosed therein), except that such financial statements may
omit footnote disclosures required by GAAP to the extent the content thereof
would not materially differ from those disclosures reported in the most recent
reviewed period and year-end adjustments to the extent not material. The
Company hereby certifies, as of the date of their delivery, that each of the
financial statements delivered pursuant to this Section 5.4(b) present fairly
the financial condition and results of operations of the Company and its
Subsidiaries for the periods covered and reflect all adjustments (which consist
only of normal recurring adjustments not material in amount) necessary for a
fair presentation.
5.5 CONDUCT OF BUSINESS. Seller and the Company agree with and for
the benefit of Buyer and Western that neither the Company nor any Subsidiary
shall take any of the following actions without the prior consent in writing of
Buyer, provided however that such consent shall not be necessary to take any
action in the ordinary course of business unless such action may foreseeably
cause a material adverse change:
(a) conduct the Business in any manner except in the ordinary course
substantially as now conducted; or
(b) amend, terminate, or renegotiate any Lease or any other Material
Contract or default (or take or omit to take any action that, with or without
the giving of notice or passage of time, would constitute a default) in any of
its obligations under any Lease or Material Contract or enter into any new lease
or Material Contract or take any action that would jeopardize the continuance of
its material supplier or customer relationships; or
(c) terminate, amend or fail to renew any existing insurance
coverage; or
48
(d) terminate or fail to renew or preserve any Permits; or
(e) incur or agree to incur any obligation or liability (absolute or
contingent) that would extend beyond the Closing that individually calls for
payment by the Company or any Subsidiary of more than Fifteen Thousand Dollars
($15,000) in any specific case or Fifty Thousand Dollars ($50,000) in the
aggregate; or
(f) make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee, stockholder or any of
their respective Associates or Affiliates; or
(g) grant any general or uniform increase in the rates of pay or
benefits to officers, directors or employees (or a class thereof) or any
material increase in salary or benefits of any officer, director, employee or
agent or pay any bonus to any person, or enter into any new employment,
collective bargaining or severance agreement; or
(h) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or any liabilities, except (i) for dispositions of property not material
in amount, or (ii) in the ordinary course of business or (iii) as may be
contemplated by this Agreement; or
(i) issue, sell, redeem or acquire for value, or agree to do so, any
debt obligations or Equity Securities of the Company or any of its Subsidiaries;
or
(j) declare, issue, make or pay any dividend or other distribution
of assets, whether consisting of money, other personal property, real property
or other thing of value, to its shareholders, or split, combine, dividend,
distribute or reclassify any shares of its Equity Securities; or
(k) change or amend its charter documents or bylaws; or
(l) make any material capital expenditures or commitments with
respect thereto; or
(m) make special or extraordinary payments to any person (other than
severance payments required under existing employment contracts); or
(n) make any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person; or
(o) dispose of or permit to lapse any rights to the use of any
material Intangible Property or dispose of or disclose any material Intangible
Property not a matter of public knowledge; or
(p) directly or indirectly terminate or reduce or commit to
terminate or reduce any bank line of credit or the availability of any funds
under any other agreement or understanding, other than through the use thereof
in the ordinary course; or
49
(q) compromise or otherwise settle any claims, or adjust any
assertion or claim of a deficiency in Taxes (or interest thereon or penalties in
connection therewith), or file any appeal from an asserted deficiency, except in
a form previously approved by Buyer in writing, or file or amend any Tax Return,
in any case before furnishing a copy to Buyer and affording Buyer an opportunity
to consult with respect thereto; or
(r) make any Tax election or make any change in any method or period
of accounting or in any accounting policy, practice or significant procedure; or
(s) introduce any new method of management or operation in respect
of the Business;
(t) enter into discussions or negotiations with any of the tenants
at the Property or otherwise take any other action with the direct or indirect
intent of inducing any of the tenants at the Property to terminate their
respective Leases or to vacate their respective leased premises at the Property;
(u) take any action prohibited by Section 9 of the Settlement
Agreement;
(v) agree to or make any commitment to take any actions prohibited
by this Section 5.5; or
(w) take any action inconsistent with this Agreement or fail to
perform in accordance with the terms of this Agreement.
5.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt written notice to Buyer, and Buyer
or Western shall give prompt notice to the Company, of (i) the occurrence, or
failure to occur, of any event that would be likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Closing Date
and (ii) any failure of Buyer, Western, Seller or the Company, as the case may
be, to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement.
(b) No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder.
5.7 PERMITS AND APPROVALS.
(a) Seller, the Company, Western and Buyer each agree to cooperate
and use their best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices preliminary to
all) Approvals and Permits that may be necessary or which may be reasonably
requested by Buyer or the Company to consummate this Agreement.
(b) To the extent that the Approval of a third-party with respect to
any Contract is required in connection with the transactions contemplated by
this Agreement, the Company shall use its best efforts to obtain such Approval
prior to the Closing Date and in the
50
event that any such Approval is not obtained (but without limitation on Buyer's
rights under Section 7.2), Seller shall cooperate with Buyer to ensure that
Buyer obtains the benefits of each such Contract.
5.8 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE. During the
period beginning on the date of this Agreement and ending on the Closing Date,
(a) the Company will use its best efforts to preserve the Business and to
preserve the goodwill of customers, suppliers and others having business
relations with the Company and its Subsidiaries and (b) the Company and Buyer
will consult with each other concerning, and the Company will cooperate to
endeavor to keep available to Buyer, the services of the officers and employees
of the Company and its Subsidiaries that Buyer may wish to have the Company and
Subsidiaries retain. Nothing in this Section shall obligate Buyer, the Company
or any Subsidiary after the Closing to retain or offer employment to any officer
or employee of the Company or any Subsidiary.
5.9 GOVERNMENT FILINGS.
(a) ALL PERMITS TO BE OBTAINED. Seller shall, and shall cause the
Company and its Subsidiaries to, and the Company shall, and shall cause its
Subsidiaries to, make any and all filings and use reasonable efforts to obtain
any and all permits or approvals required to be made or obtained by Seller, the
Company or any Subsidiary in order to consummate this Agreement and any related
transactions, including, without limitation, the filings and permits listed in
SCHEDULE 2.9. Buyer and Western shall make any and all filings and use
reasonable efforts to obtain any and all permits or approvals required to be
made or obtained by Buyer or Western in order to consummate this Agreement and
any related transactions, including, without limitation, the filings and permits
listed in SCHEDULE 3.5. Seller, the Company and Buyer shall furnish each other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the provisions of such Laws. Seller, the Company and Buyer will supply to
each other copies of all correspondence, filings or communications, including
file memoranda evidencing telephonic conferences, by such party or its
affiliates with any Governmental Entity or members of its staff, with respect to
the transactions contemplated by this Agreement and any related transactions.
(b) XXXX-XXXXX-XXXXXX ACT. Without limiting the generality of the
foregoing, either:
(i) NO FILING NECESSARY. Company and Western shall have
agreed that no filing is required under the Xxxx-Xxxxx-Xxxxxx Act in
connection with the transactions contemplated by this Agreement; or
(ii) PRE-MERGER NOTIFICATION FILINGS. No later than five (5)
business days after the date of this Agreement, each of Seller and Buyer
shall file with the Federal Trade Commission ("FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division"), and shall
deliver to the other a copy of, the pre-merger notification application
(without attachments), pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, duly completed and duly executed by
Seller, Company, Western or Buyer, as applicable under the
Xxxx-Xxxxx-Xxxxxx Act, and each shall also deliver to the other copies of
any and all information and/or correspondence transmitted from such party
(and/or any of its affiliates or consultants) to the FTC and
51
the Antitrust Division with respect thereto. Such documents, information
and correspondence are sometimes herein referred to as "Seller's Pre-Merger
Notice" and "Buyer's Pre-Merger Notice," respectively. Additionally, each
of Seller and Buyer shall deliver to the other promptly from time to time
copies of any other information and/or correspondence transmitted to or
from such party and/or the FTC or the Antitrust Division with respect to
the Seller's or Buyer's Pre-Merger Notice, as the case may be. Both
Seller's and Buyer's filing shall request early termination of the waiting
period. Buyer and the Company shall each pay one-half (1/2) of the filing
fee associated with the filing of the Pre-Merger Notice. The Company shall
tender to Buyer the Company's share of such filing fee upon Buyer's written
request.
5.10 INTERCOMPANY AND AFFILIATE LIABILITIES.
(a) NO RECENT CONTRIBUTIONS. Within two years prior to the date of
this Agreement, Seller has not contributed any assets to the capital of the
Company or any Subsidiary, within the meaning of Section 118 of the Code other
than as set forth on SCHEDULE 5.10; and
(b) NO RECENT CANCELLATIONS. Within two years prior to the date of
this Agreement, Seller has not cancelled any intercompany loans or extensions of
credit of any type owed Seller by the Company other than as set forth on
SCHEDULE 5.10.
5.11 TERMINATION/RETENTION OF EMPLOYEES; WARN ACT.
(a) RETENTION OF KEY EXECUTIVES; EMPLOYMENT AGREEMENTS. Each of the
Company and each Subsidiary, as applicable, shall use its best efforts to enter
into employment agreements with any employees that are named by Buyer in a
letter (the "Employee Retention Letter") delivered to the Company. If delivered
at all, the Employee Retention Letter shall be delivered no later than the final
day of the Due Diligence Period. If Xxxx Xxxxx and Xxxxxx Xxxxxxx are named in
the Employee Retention letter, the Company shall use reasonable efforts to cause
the employment agreements with such individuals to include a covenant not to
compete with the Company or its Subsidiaries in their geographic markets for a
period of two years following any termination of employment, except as may
otherwise be agreed between Western and such employees.
(b) COSTS OF TRANSITION TO THIRD-PARTY LESSEES.
(i) The parties to this Agreement understand that Buyer
intends, at or soon after the Closing, to lease all of the Stores to
third-party operators who are independent businesses and employers
("Operators"). If Buyer leases the Stores to such Operators, the leases
are not required to include an obligation on such Operators to employ any
specific number of the Stores' pre-Closing employees or to assume any
collective bargaining agreements or union relationships that may exist with
respect to such Stores. Such leases may also allow Operators the right
lawfully to determine wages, hours and working conditions for their
operation of the Stores.
(ii) The parties to this Agreement understand that subsequent
to Closing, Buyer may, without limitation, (1) terminate operations at one
or more Stores until the applicable Operator's lease commences, (2)
terminate operations at one or more Stores
52
permanently, and/or (3) cause the Company to continue to operate one or
more Stores until the lease commences (the "Transition Options")
(iii) Buyer agrees to communicate to the Company and the
Representative its specific intent and timetable with respect to the
Transition Options from time to time as the facts change materially or upon
the reasonable request of the Company or the Representative. Company and
Seller (through the Representative) agree to take all actions reasonably
requested by Buyer (and all actions incidental and appropriate thereto) in
order to implement the Transition Options.
(iv) Regardless of which Transition Option Buyer elects to
apply to any particular Store, Seller agrees to retain and bear all legal
obligations, financial responsibility and liability, including a duty to
defend (pursuant to the procedures set forth in Section 9.4(b)), with
respect to (A) any obligations (including, without limitation, the
obligation to engage in so-called "effects bargaining") that the Company
may have to the unions representing employees at any of the Stores arising
from or in connection with Buyer's transfer of Stores to Operators or other
exercise of Buyer's Transition Options and (B) any obligation derived
therefrom to pre-Closing employees (whether or not they may be hired by an
Operator); PROVIDED, HOWEVER, that Seller's obligations under this
subsection (iv) shall terminate with respect to any individual Store and
its employees, fifteen (15) months after the Closing Date if the Company is
still operating such Store on such date. The Company and Buyer hereby
grant Seller, acting through the Representative, the authority to act as
the Company's bargaining agent to the extent necessary or appropriate in
order that Seller may satisfy its responsibilities under this subsection
(iv).
(v) Seller agrees that the Company shall create a pre-Closing
reserve to fund the cost of the legal obligations, financial responsibility
and liability referred to in the immediately preceding paragraph (iv) as
though such cost were a pre-Closing expense, and accordingly such cost
shall be estimated on the preliminary Closing Balance Sheet within the line
item "Severance" and shall be set forth on the Final Closing Balance Sheet
(as more fully described in Section 1.4(b)). The Company shall bear any
professional expense incurred in the ordinary course in connection with the
Transition Options, which expense shall be paid from such pre-closing
reserve; PROVIDED, that Seller shall remain responsible for any
professional expenses incurred in connection with any litigation (pending
or threatened) or any investigations or hearings by any Governmental Entity
in connection with the Transition Options.
(vi) Buyer agrees that, post-Closing and prior to the
third-party leases, the Company shall remain liable (as a post-Closing
expense) for, and will hold Seller harmless from, all normal operating
expenses (including payment of employee wages and benefits, but not
including any severance payments or other wage-based penalties that may be
payable by the Seller under Section 5.11(b)(iv)) and normal operating
obligations (including ongoing union obligations, if any, but not including
any obligations assumed by Seller under Section 5.11(b)(iv)).
(vii) All parties agree to cooperate in good faith with each
other to implement the Transition Options in a manner that will minimize
disruption, expenses and liabilities
53
of all parties. In carrying out its agency authority under subsection
5.11(b)(iv), Seller shall keep the Company informed and, at the Company's
request, shall meet and confer with the Company.
(c) WARN ACT NOTICES. Based on the representation and warranty of
the Company in Section 2.31, the parties agree that WARN Act notices will not be
required in connection with the Closing or in connection with Buyer's exercise
of the Transition Options.
5.12 REAL PROPERTY TRANSFER TAXES. Seller shall pay (or promptly
reimburse Buyer or Western for) any real property transfer taxes and any excise
taxes arising as a result of the sale of Stock pursuant to this Agreement.
ARTICLE 6
ADDITIONAL CONTINUING COVENANTS
6.1 NONDISCLOSURE OF PROPRIETARY DATA. After the Closing, neither
Seller nor any of its representatives shall, at any time, make use of, divulge
or otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, record or
financial information) concerning the business or policies of the Company or any
of its Subsidiaries that Seller or any representative of Seller may have learned
as a shareholder, employee, officer or director of the Company or any of its
Subsidiaries. In addition, neither Seller nor any of its representatives shall
make use of, divulge or otherwise disclose, directly or indirectly, to persons
other than Buyer or Western, any confidential information concerning the
business or policies of the Company and its Subsidiaries which may have been
learned in any such capacity.
6.2 FEDERAL SECURITIES LAW DISCLOSURE COOPERATION. After the
Closing, Seller shall, and shall cause its respective subsidiaries and
Affiliates to, cooperate fully with Buyer, Western, the Company and its
Subsidiaries in providing information reasonably requested for the preparation
of all disclosure documents to be filed by Buyer, Western, the Company or their
affiliates with the Securities and Exchange Commission (the "Commission") and
shall provide, or cause to be provided at such Selling Stockholder's sole cost
and expense, to Buyer, the Company and its Subsidiaries any records and other
information reasonably requested by such parties in connection therewith. Each
Selling Stockholder shall, and shall cause its Affiliates to, cooperate fully
with Buyer, Western, the Company and the Subsidiaries in connection with any due
diligence investigation of such information or Commission inquiry, audit or
other proceeding.
6.3 TAX COOPERATION. After the Closing, each Selling Stockholder
shall cooperate fully with Buyer, the Company and its Subsidiaries in the
preparation of all Tax Returns and shall provide, or cause to be provided at
such Selling Stockholder's sole cost and expense, to Buyer, the Company and its
Subsidiaries any records and other information reasonably requested by such
parties in connection therewith. Seller shall, and shall cause its Affiliates
to, cooperate fully with Buyer, the Company and the Subsidiaries in connection
with any Tax investigation, audit or other proceeding. Any information obtained
pursuant to this Section 6.3 or pursuant to any other Section of this Agreement
providing for the sharing of information or the review of any Tax Return or
other schedule relating to Taxes shall be subject to Section 10.9.
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6.4 REPRESENTATIVE. Each Selling Stockholder hereby appoints a
group, acting unanimously, of (i) the President of the Company, and (ii) the two
personal representatives of the Estate of Xxxx Xxxxx (or the two trustees of the
trust created by his will) OR one of such personal representatives (or trustees)
and attorney Xxxx Xxxxxxxx (or a successor to him designated in writing by the
Attorney General of the State of Oregon), and (iii) any of Xxx Xxxxxx,
Xxxxxxxxxx Xxxxx or Xxxxxx Xxxxxx, as representative (the "Representative") to
take such actions as this Agreement specifically contemplates that the
Representative may take (PROVIDED, HOWEVER, that after the Closing, such group
shall not include the President of the Company), including, without limitation,
(a) certification of the Closing Balance Sheet and the allocation of liability
referred to in Section 1.4(b); (b) the allocation of the cash portion of the
Purchase Price referred to in Section 1.4(c); (c) the waiver of closing
conditions referred to in Sections 7.1 and 7.3; and (d) the execution of the
closing certificate referred to in Section 7.2(b). In addition, each Selling
Stockholder hereby authorizes the Representative to enter into any amendment to
this Agreement on behalf of such Selling Stockholder. Actions by the
Representative in connection with this Agreement and any amendment shall be
taken by such procedures as the Representative shall adopt. Each Selling
Stockholder understands and agrees that the Representative has been appointed as
the Representative by each of the other Selling Stockholders. Each Selling
Stockholder agrees that Buyer shall be entitled to rely on the advice,
information and decisions of the Representative evidenced by a writing that
appears on its face to have been signed by (i) the President of the Company
(PROVIDED, HOWEVER, that for any action taken after the Closing, the signature
of the President of the Company shall not be required), (ii) the two personal
representatives of the Estate of Xxxx Xxxxx (or the two trustees of the trust
created by his will) OR by one of such personal representatives (or trustees)
and attorney Xxxx Xxxxxxxx (or a successor to him designated in writing by the
Attorney General of the State of Oregon), and (iii) any of Xxx Xxxxxx,
Xxxxxxxxxx Xxxxx or Xxxxxx Xxxxxx, without any obligation independently to
verify, authenticate or seek the confirmation or approval of the
Representative's advice, information or decisions or any other facts from the
Selling Stockholders or any other Person, except as may otherwise be expressly
provided in this Agreement. Any certificate to be delivered by the
Representative, if such certificate so provides, shall constitute a
reaffirmation of any representations herein as of the Closing by each Selling
Stockholder unless such Selling Stockholder otherwise notifies the
Representative and Buyer in writing on or prior to the Closing of any exceptions
thereto.
6.5 RELEASE.
(a) AGREEMENT. Effective as of the Closing and except as to the
matters set forth in SCHEDULE 2.19, each Selling Stockholder agrees not to xxx
and fully releases and discharges each of the Company and its Subsidiaries, past
and present, including, without limitation, its directors, officers, employees,
shareholders, representatives, agents, assigns and successors, past and present
(collectively "Releasees"), with respect to and from any and all claims,
issuances of the Company's stock (including preemptive rights), notes or other
securities, any demands, rights, liens, agreements, contracts, covenants,
actions, suits, causes of action, obligations, debts, costs, expenses, damages,
judgments, orders and liabilities of whatever kind or nature in Law, equity or
otherwise, whether now known or unknown, and whether or not concealed or hidden,
all of which each Selling Stockholder now owns or holds or has at any time owned
or held against Releasees.
55
(b) WAIVER. It is the intention of each Selling Stockholder that
such release be effective as a bar to each and every claim, demand and cause of
action hereinabove specified. In furtherance of this intention each Selling
Stockholder hereby expressly waives, effective as of the Closing, any and all
rights and benefits conferred upon him by the provisions of Section 1542 of the
California Civil Code and expressly consents that this release shall be given
full force and effect according to each and all of its express terms and
provisions, including as well, those related to unknown and unsuspected claims,
demands and causes of action, if any, as those relating to any other claims,
demands and causes of action hereinabove specified, but only to the extent such
section is applicable to releases such as this. Section 1542 provides:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
6.6 AGREEMENT TO CONVEY RIGHTS TO THE NAME "XXXXXX'X". Buyer shall
convey to Xxx Xxxxxx III upon request the right to use the name "Xxxxxx'x" (and
variations thereof) if customary grocery store use of the name by Western and/or
Buyer or SuperValue (a potential lessee) is affirmatively discontinued after the
Closing at all properties owned or leased by Buyer for a consecutive (not
cumulative) period of six months; PROVIDED, HOWEVER, that any discontinued use
that results from one or more stores changing tenants, or being refurbished or
reconstructed (whether as the result of new tenant improvements or as a result
of damage or destruction or otherwise) shall not be counted towards such six
month period.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 GENERAL CONDITIONS. The obligations of the parties to effect
the Closing shall be subject to the following conditions unless waived in
writing by Buyer and the Representative:
(a) NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending or have been
threatened and remain so at what would otherwise be the Closing Date, which
prohibits or restricts or would (if successful) prohibit or restrict the
transactions contemplated by this Agreement or (with respect to obligations of
Buyer only) which would not permit the Business as presently conducted to
continue unimpaired following the Closing Date. No Governmental Entity shall
have notified any party to this Agreement that consummation of the transactions
contemplated by this Agreement would constitute a violation of any Laws of any
jurisdiction and/or that it intends to commence proceedings to restrain or
prohibit such transactions or force divestiture or rescission, unless such
Governmental Entity shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(b) APPROVALS. To the extent required by applicable Law, all
Permits and Approvals required to be obtained from any Governmental Entity
pursuant to this Agreement shall have been received or obtained on or prior to
the Closing Date and any applicable waiting period under the Xxxx-Xxxxx-Xxxxxx
Act shall have expired or been terminated.
56
(c) RESOLUTION OF ALL OPEN ISSUES. The parties shall have resolved,
in one or more written agreements, all material issues specifically left open
for further agreement by this Agreement, including, without limitation,
identification of the assets to be contributed by Buyer to the DownREIT (Section
1.5(c)(ii)) and negotiation of the Partnership Agreement.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
and Western to effect the Closing shall be subject to the following conditions
except to the extent waived in writing by Buyer:
(a) TENDER OF ALL STOCK. All Selling Stockholders shall have
delivered for sale to Buyer or contribution to the DownREIT on or before the
Closing, stock certificates representing all shares of the Stock as contemplated
hereby, with stock powers duly executed in blank.
(b) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SELLER. The
representations and warranties of the Company, Seller and of each Selling
Stockholder contained in this Agreement shall be true and correct at the Closing
Date with the same effect as though made at and as of such time; each of the
Company, Seller and each Selling Stockholder shall have performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and the Company and Seller shall have delivered to Buyer (i) a certificate
of the Company (signed by Xxxx Xxxxx, its President and Treasurer, and Xxxxxx X.
Xxxxxxxxx, Xx., its Vice President) regarding the Company's representations,
warranties, obligations and covenants and (ii) a certificate of Seller (signed
by the Representative) regarding the Selling Stockholders' representations,
warranties, obligations and covenants, each in form and substance reasonably
satisfactory to Buyer, dated the Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
Material Adverse Change subsequent to the date of this Agreement.
(d) DUE DILIGENCE. There shall have been no terminations of, or
amendments to, any of the agreements (including, without limitation, the Leases)
delivered or made available to Buyer as part of its due diligence review, except
in the ordinary course of business.
(e) NO DISPUTES BETWEEN SELLING STOCKHOLDERS. There shall have
arisen no suits or actions, or threats thereof, between or among any of the
Selling Stockholders, which have not been resolved and which could reasonably be
expected materially and adversely to affect the performance or enforceability of
this Agreement, including the sale of the Stock to Buyer and post-closing
reconciliations.
(f) OPINION OF COUNSEL TO THE COMPANY. Buyer shall receive at the
Closing from Miller, Nash, Wiener, Hager & Xxxxxxx LLP, counsel to the Company,
an opinion dated the Closing Date, in form and substance substantially as set
forth in EXHIBIT C.
(g) CONSENTS. Company or Seller shall have obtained (subject to no
unduly burdensome, I.E., costly to comply with, conditions) and provided to
Buyer all required Approvals and Permits listed on SCHEDULE 2.9 and Buyer shall
have obtained all Approvals and
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Permits and consents listed on SCHEDULE 3.5, each in form and substance
reasonably satisfactory to Buyer.
(h) XXXX-XXXXX-XXXXXX ACT. Without limiting the generality of
Section 7.2(g), either the Company and Western shall have agreed that no filing
is required under the Xxxx-Xxxxx-Xxxxxx Act in connection with the transactions
contemplated by this Agreement or HSR Compliance shall have occurred.
(i) HSR COMPLIANCE. As used herein, the term "HSR
Compliance" shall mean (1) either (A) the receipt by Buyer and Seller of
the FTC No-Action Letter or the FTC Approval Letter, or (B) the No FTC
Letter (after the relevant waiting period), AND (2) either (A) the receipt
by Buyer and Seller of the Grant of Early Termination Request or Antitrust
Division No-Objection Letter, or (B) the No Antitrust Division Letter
(after the relevant waiting period).
(ii) FTC APPROVAL MATTERS. As used herein, the following
terms have the following meanings in connection with Seller's Pre-Merger
Notice and Buyer's Pre-Merger Notice (collectively, the "Pre-Merger
Notice"):
(1) FTC NO-ACTION LETTER. The "FTC No-Action Letter"
means a duly executed no-action letter from the FTC permitting the
transaction contemplated by this Agreement in its entirety.
(2) FTC APPROVAL LETTER. The "FTC Approval Letter"
means a duly executed letter from the FTC approving this transaction
in its entirety.
(3) EXTENSION LETTER. The "FTC Extension Letter"
means a duly executed extension letter from the FTC extending the
waiting period described in Section 7A(b)(1) of the Xxxx-Xxxxx-Xxxxxx
Act for a period not to exceed twenty (20) calendar days in addition
to the initial thirty (30) calendar day waiting period. In the event
Buyer and Seller receive the FTC Extension Letter, this closing
condition shall not be deemed fulfilled (and the Closing Date shall be
extended for a period of not more than thirty (30) days) unless and
until Buyer and Seller receive one of the following: the FTC
No-Action Letter, the FTC Approval Letter or No FTC Letter (as
hereinafter defined).
(4) NO FTC LETTER. The "No FTC Letter" means the
non-receipt of any letter form the FTC objecting to the transaction
contemplated by this Agreement after the relevant waiting period.
(iii) ANTITRUST DIVISION APPROVAL. As used herein, the
following terms have the following meanings in connection with the
Pre-Merger Notice:
(1) GRANT OF EARLY TERMINATION REQUEST. The "Grant of
Early Termination Request" means a duly executed letter from the
Antitrust Division granting Buyer's or Seller's request for early
termination of the waiting period and thereby permitting the
transaction contemplated by this Agreement in its entirety.
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(2) NO OBJECTION LETTER. The "Antitrust Division
No-Objection Letter" means a duly executed letter from the Antitrust
Division not objecting to the transaction contemplated by this
Agreement in its entirety.
(3) EXTENSION LETTER. The "Antitrust Division
Extension Letter" means a duly executed letter from the Antitrust
Division extending the waiting period described in Section 7A(b)(1) of
the Xxxx-Xxxxx-Xxxxxx Act for a period not to exceed twenty (20)
calendar days in addition to the initial thirty (30) calendar day
waiting period. In the event Buyer and Seller receive the Antitrust
Division Extension Letter, this Closing Condition shall not be deemed
fulfilled unless and until one of the following occurs: Buyer and
Seller receive the Antitrust Division No-Objection Letter, or No
Antitrust Division Letter, as hereinafter defined.
(4) NO ANTITRUST DIVISION LETTER. The "No Antitrust
Division Letter" means the non-receipt of any letter from the
Antitrust Division objecting to the transaction contemplated by this
Agreement after the relevant waiting period.
(i) CLOSING BALANCE SHEET. Buyer shall have received the Closing
Balance Sheet, updated pursuant to Section 1.4(b), together with the
Accountants' report referred to in Section 1.4(b)(i).
(j) COMFORT LETTER. Buyer shall have received from the Accountants
a report of their performance of agreed-upon procedures (through a date no more
than two business days prior to the Closing Date) and the results obtained,
dated the closing date and in substantially the form of EXHIBIT D.
(k) NO UNRESOLVED OBJECTION FROM BUYER'S ACCOUNTANTS. Buyer's
Accountants shall not in good faith have raised any material, written objection
to the results obtained by the Company's Accountants, unless such dispute has
been resolved to Buyer's reasonable satisfaction prior to the Closing Date.
(l) RESIGNATION OF DIRECTORS AND CERTAIN OFFICERS AND TERMINATION OF
EMPLOYEES. All of the directors and officers of the Company and its
Subsidiaries that are not listed in the Employee Retention Letter, shall have
submitted their resignations in writing to the Company or Subsidiaries, as
applicable. The employment of all of the employees of the Company and its
Subsidiaries required to be terminated by Section 5.11(b), shall have been
terminated. The Company shall have taken all other actions reasonably requested
by Buyer under Section 5.11(b). Such resignations of officers and directors (in
such capacity) shall be effective as of the Closing and such other terminations
of employment shall be effective immediately prior to the Closing (unless
otherwise requested by Buyer).
(m) EMPLOYMENT AGREEMENTS. The Company shall have used its best
efforts to procure the new or amended employment agreements referred to in
Section 5.11(a).
(n) LEASES. Except as disclosed on the Certified Rent Roll, (A)
each of the Leases set forth on the Rent Roll shall remain a valid and
enforceable Lease, (B) no tenant under a Lease shall be more than thirty (30)
days in arrears in its rent payments, (C) no tenant under
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a Lease of premises greater than five thousand (5,000) square feet shall be the
subject of any bankruptcy or reorganization, (D) no tenant under a Lease of
premises greater than five thousand (5,000) square feet shall have abandoned its
premises at the Property, and (E) no tenant under a Lease of premises greater
than five thousand (5,000) square feet shall have ceased conducting normal
business operations from its premises at the Property except as a result of an
existing contractual termination provision.
(o) NO REGULATORY CHANGES. No action shall have been taken by any
Governmental Entity, and no Law shall have been enacted, which would materially
and adversely affect the financial condition, operations or prospects of Buyer,
Western, the Business or the Company and/or any Subsidiary (including, without
limitation, any proposal or enactment that would materially and adversely limit
the ability of a REIT to own a subsidiary that engages in, or the ability of a
subsidiary of a REIT to engage in, activities that would be inconsistent with
REIT status if engaged in directly by a REIT), or the regulatory compliance
status of the Company, Buyer or Western (including, without limitation, the
status of Western as a REIT).
(p) INVESTOR SUITABILITY QUESTIONNAIRE. Each Electing Stockholder
shall have delivered an Investor Suitability Questionnaire, the form of which is
attached to this Agreement as EXHIBIT A, to Buyer.
(q) ABILITY TO CONDUCT AUDITS REQUIRED BY FEDERAL SECURITIES LAWS.
Seller acknowledges and agrees that Buyer and/or Western has advised Seller that
Buyer and/or Western may be required by the rules and regulations promulgated by
the Commission or by its auditors to have financial statement audits performed
of the records of the Properties and/or the Company and its Subsidiaries.
Accordingly, in the event that Buyer's Accountants determine in good faith that
such a requirement exists, it shall be a further condition to Closing that all
of the documents and information required for the performance of such audits are
in Company's possession and control, including, without limitation: (i) copies
of Property operating statements for the last three (3) years through the
Closing Date; (ii) copies of all Leases for all tenants in occupancy at the
Properties for the last three (3) years through the Closing Date; (iii) access
to any existing detail of unpaid rent and other charges as of the last three (3)
years and the most recent date available prior to the Closing Date, together
with documentation supporting subsequent collection explanations and/or
uncollected balances; (iv) copies of operating expense pass-through
reconciliation statements and related adjustments, if any, for the last three
(3) years through the Closing Date; (v) access to the invoices supporting
operating expenses paid by tenants for the last three (3) years through the
Closing Date; (vi) copies of real property tax bills for the last three (3)
years through the Closing Date; (vii) schedules of all tenants granted free rent
for the last three (3) years through the Closing Date; and (viii) copies of any
and all other documents necessary for the Buyer or Western to comply with Rule
3-14 of Regulation S-X promulgated by the Commission. Further, the chief
executive officer and the principal accounting officer will sign and provide
standard audit representation letters, substantially in the form on EXHIBIT J to
this Agreement, in support of the financial statements required by Rule 3-14.
(r) ENVIRONMENTAL RESERVE. The parties shall have agreed, in
writing, upon a valuation of the Environmental Reserve line item on the
preliminary Closing Balance Sheet (if necessary under Section 1.4(b)(ii)(9)).
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(s) SUPPLEMENTAL DISCLOSURE SCHEDULE. The Supplemental Disclosure
Schedule shall not disclose any developments in the Business arising, or any
liabilities of the Company arising, outside of the ordinary course of business.
7.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
to effect the Closing shall be subject to the following conditions, except to
the extent waived in writing by the Representative:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER AND
WESTERN. The representations and warranties of Buyer and Western contained in
this Agreement shall be true and correct at the Closing Date with the same
effect as though made at and as of such time; each of Buyer and Western shall
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Buyer and Western each shall have delivered to Seller
certificates to such effect in form and substance satisfactory to Seller, dated
the Closing Date.
(b) OPINION OF COUNSEL TO WESTERN AND BUYER. Seller shall receive
at the Closing from O'Melveny & Xxxxx LLP, counsel to Western and Buyer, an
opinion dated the Closing Date, in form and substance substantially as set forth
in EXHIBIT H.
(c) CONSENTS. The Company or Seller shall have obtained all
required Approvals and Permits listed on SCHEDULE 2.9 and Buyer or Western shall
have obtained all Approvals and Permits and consents listed on SCHEDULE 3.5,
each in form and substance reasonably satisfactory to the Representative.
(d) ENVIRONMENTAL RESERVE. If the mean average of the
Environmental Reserve estimates referred to in Section 1.4(b)(ii)(9) (I.E., the
sum of the estimates divided by the number of estimates) is greater than
$100,000, either (i) the parties shall have agreed upon a valuation of the
Environmental Reserve line item on the preliminary Closing Balance Sheet or (ii)
Buyer shall have elected for the Environmental Reserve line item to be valued at
$200,000 as more fully described in Section 1.4(b)(ii)(9).
ARTICLE 8
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 TERMINATION UPON FAILURE OF DUE DILIGENCE CONDITIONS PRECEDENT.
On or prior to the final day of the due diligence period, Buyer shall deliver to
Seller a report of which due diligence conditions precedent it has approved,
confirmed or waived, as applicable, and setting forth its objections as to any
unapproved or unconfirmed conditions.
(a) LACK OF APPROVAL BY BUYER. In the event that one or more of the
due diligence matters set forth in Section 4.1 have not been approved or
confirmed, as applicable, (or waived) expressly in writing by Buyer on or prior
to the final day of the Due Diligence Period, Seller and the Company shall have
fifteen (15) days from the final day of the Due Diligence Period to cure Buyer's
objections to such unapproved or unconfirmed conditions to Buyer's written
satisfaction (the "Cure Period"). In the event that Buyer does not deliver such
written evidence of its satisfaction, this Agreement shall automatically
terminate as of 8:00 P.M. Pacific
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time on the final day of such Cure Period. In the event that Buyer does deliver
such written evidence of its satisfaction prior to the end of such Cure Period,
this Agreement shall remain in full force and effect except that the Scheduled
Closing Date shall be fifteen (15) days later than the day specified in Section
1.8. In the event that the Second Deposit Date or the Third Deposit Date falls
within a Cure Period, such deposit may be delayed, at Buyer's option, until the
day after the end of such Cure Period.
(b) WRITTEN DISAPPROVAL BY BUYER. In the event that Buyer, in
Buyer's sole good faith discretion, at any time prior to the final day of the
Due Diligence Period, gives Seller written notice of Buyer's disapproval of (and
objections to) any of the due diligence matters set forth in Section 4.1 and in
such notice elects to terminate this Agreement on the grounds of such
disapproval, Seller and the Company shall have fifteen (15) days from the date
of such notice to cure such condition to Buyer's written satisfaction. In the
event that Buyer does not deliver such written evidence of its satisfaction,
this Agreement shall automatically terminate as of 8:00 P.M. Pacific time on the
final day of such Cure Period. In the event that Buyer does deliver such
written evidence of its satisfaction prior to the end of such Cure Period, this
Agreement shall remain in full force and effect except that to the extent that
the date of such delivery of written satisfaction falls after the final day of
the Due Diligence Period, the Scheduled Closing Date shall delayed by the same
number of days compared to the date specified in Section 1.8. In the event that
the Second Deposit Date or the Third Deposit Date falls within a Cure Period,
such deposit may be delayed, at Buyer's option, until the day after the end of
such Cure Period.
8.2 OTHER GROUNDS FOR TERMINATION. Anything in this Agreement to
the contrary notwithstanding, this Agreement and the transactions contemplated
by this Agreement shall terminate if the Closing does not occur on or before the
close of business on the Scheduled Closing Date unless extended by mutual
consent in writing of Buyer and Seller and otherwise may be terminated (i) as
set forth in Section 8.1 or (ii) at any time before the Closing as follows and
in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of Buyer and
Seller.
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer by written
notice to the Company if any event occurs or condition exists which would render
impossible the satisfaction of one or more conditions to the obligations of
Buyer to consummate this Agreement as set forth in Section 7.1 (other than as a
result of a default or the lack of a required performance by Buyer) or 7.2.
(c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. By the
Representative by written notice to Buyer if any event occurs or condition
exists which would render impossible the satisfaction of one or more conditions
to the obligation of Seller to consummate this Agreement as set forth in
Section 7.1 (other than as a result of a default or the lack of a required
performance by Seller or the Company) or 7.3.
(d) INACCURATE INFORMATION FROM SELLER OR THE COMPANY. By Buyer if
any material written information delivered by Seller, the Company or any
Subsidiary (or on behalf of any of the foregoing by Macadam Capital Partners or
counsel to the Company) to Buyer is inaccurate or incomplete in any material
respect.
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(e) INACCURATE INFORMATION FROM BUYER OR WESTERN. By the
Representative if any material information (whether or not in writing) delivered
by or on behalf of Buyer or Western is inaccurate or incomplete in any material
respect.
(f) MATERIAL BREACH. By Buyer or the Representative, if there has
been a material misrepresentation or other material breach by the other party
(or, in the case of Buyer, by Seller or the Company; or in the case of Seller,
by Buyer or Western) in its representations, warranties and covenants set forth
herein; PROVIDED, HOWEVER, that if such breach is susceptible to cure, the
breaching party shall have ten (10) business days after receipt of written
notice from the other party of its intention to terminate this Agreement if such
breach continues in which to cure such breach.
(g) FORCE MAJEURE. By either party, if any of the following
conditions exist or shall have occurred and, at the time the moving party gives
notice to the other party of the moving party's intent to invoke this provision,
shall be continuing: (1) any general suspension of trading in, or limitation on
prices for, securities on the New York Stock Exchange or the American Stock
Exchange, (2) a declaration of a banking moratorium by federal or state
authorities or any suspension of payments in respect of banks in the United
States, (3) the commencement of a war or armed hostilities involving the United
States which commences after the date of this Agreement, (4) any material
limitation (whether or not mandatory) imposed by any federal or state authority
on the extension of credit by lending institutions in the United States, or
(5) any other occurrence or circumstance beyond the reasonable control of the
moving party or occurring without negligence on the part of such party
(including but not limited to sudden actions of the elements, actions by any
Governmental Entity, epidemic, riot, unavailability of resources due to national
defense priorities, delays resulting from the failure of a third party to
perform any related matter which such third party is required to perform,
strikes, walkouts, major accidents, flood, drought, earthquake, storm, fire,
pestilence, lightning, volcanic eruption, or other natural catastrophe or civil
disturbance) that renders commercially unreasonable the obligations, or
materially less valuable the rights, of the moving party under this Agreement.
8.3 EFFECT OF TERMINATION. In the event that this Agreement shall
be terminated pursuant to Section 8.1 or Section 8.2, all further obligations of
the parties under this Agreement shall terminate without further liability of
any party to any other; PROVIDED, HOWEVER, that the obligations of the parties
contained in Section 1.2 (Pre-Closing Redemption), Section 10.9
(Confidentiality) and Section 10.14 (Expenses) and the obligation of the Company
to promptly refund the Deposits under Section 1.6 (without demand, deduction or
offset) shall survive any such termination. A termination under Section 8.1 or
Section 8.2 shall not relieve any party of any liability for a breach of, or for
any misrepresentation under this Agreement, or be deemed to constitute a waiver
of any available remedy (including specific performance if available) for any
such breach or misrepresentation.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in or made pursuant to this Agreement shall expire on
the second anniversary of the Closing Date, except that:
(a) the representations and warranties contained in Section 2.3
(certain Selling Stockholder matters) shall survive the Closing and shall remain
in full force and effect indefinitely;
63
(b) the representations and warranties contained in Article 3 shall
survive the closing and shall expire on the sixth anniversary of the Closing
Date;
(c) the agreements made in this Section 8.4 and Section 8.3 shall be
continuing; and
(d) if a claim is made or notice is given under Article 9
(Indemnification) with respect to any specific Loss resulting from an inaccuracy
or breach of a representation or warranty prior to the applicable expiration
date, indemnification responsibility for such Loss shall continue indefinitely
until such claim is finally resolved.
8.5 ENFORCEABILITY OF REPRESENTATIONS AND WARRANTIES AGAINST SELLER
BY CERTAIN THIRD-PARTIES. Seller acknowledges that concurrently with Buyer's
acquisition of the Stock, Buyer may contribute all of the Stock acquired by it
to the DownREIT or sell a portion of the Company's assets to a third-party or an
affiliate of Buyer (each a "Transferee"). Seller agrees that, subject to the
terms and conditions of this Agreement, all of Seller's representations,
warranties, covenants and indemnities shall inure to the benefit of and be
enforceable by each such Transferee with respect to all of the Stock, in the
case of the DownREIT, and with respect to the assets acquired by the Transferee
from Buyer, in the case of any other Transferee. Each such Transferee shall be
a third-party beneficiary of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 OBLIGATIONS OF SELLER. Each Selling Stockholder agrees to
indemnify, defend and hold harmless Buyer, Western, the Company, its
Subsidiaries, and their respective directors, officers, employees, affiliates,
agents and assigns from and against any and all Losses not covered by insurance
(as determined under Section 9.4(d)(ii) below) of Buyer, Western, the Company or
any Subsidiary or their respective directors, officers, employees, affiliates,
agents or assigns, directly or indirectly, as a result of, or based upon or
arising from:
(a) any inaccuracy in any of the representations and warranties made
by the Company or the Selling Stockholders or any of them in or pursuant to this
Agreement; or
(b) any breach or nonperformance of any of the covenants or
agreements made by the Company or the Selling Stockholders or any of them in or
pursuant to this Agreement; or
(c) any claim against the Company, Buyer, Western or the DownREIT in
connection with, the United Grocers stock pass-through arrangement described in
Section 1.4(b)(ii)(6); or
(d) any claim against the Company, Buyer, Western or the DownREIT
for breach of, or otherwise in connection with, the Settlement Agreement.
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9.2 OBLIGATIONS OF BUYER. Buyer and Western agree to indemnify and
hold harmless each Selling Stockholder from and against any Losses not covered
by insurance (as determined under Section 9.4(d)(ii) below) of Seller as a
result of any inaccuracy in or breach or nonperformance of (a) any of the
representations and warranties, or (b) any of the covenants or agreements, in
each case made by Buyer or Western in this Agreement; and from and against any
Losses of Seller that (i) occur after the Closing and arise from post-Closing
operations and (ii) are not a result of, or based upon or arising from, any of
the matters set forth in Section 9.1.
9.3 [RESERVED].
9.4 PROCEDURE.
(a) NOTICE. Any party seeking indemnification with respect to any
Loss shall give notice to the party required to provide indemnity hereunder (the
"Indemnifying Party").
(b) DEFENSE. If any claim, demand or liability is asserted by any
third party against any Indemnified Party, the Indemnifying Party shall upon the
written request of the Indemnified Party, defend any actions or proceedings
brought against the Indemnified Party in respect of matters embraced by the
indemnity, but the Indemnified Party shall have the right to conduct and control
the defense, compromise or settlement of any Indemnifiable Claim if the
Indemnified Party chooses to do so, on behalf of and for the account and risk of
the Indemnifying Party who shall be bound by the result so obtained to the
extent provided herein. If, after a request to defend any action or proceeding,
the Indemnifying Party neglects to defend the Indemnified Party, a recovery
against the latter suffered by it in good faith, is conclusive in its favor
against the Indemnifying Party; PROVIDED, HOWEVER, that, if the Indemnifying
Party has not received reasonable notice of the action or proceeding against the
Indemnified Party, or is not allowed to control its defense, judgment against
the Indemnified Party is only presumptive evidence against the Indemnifying
Party. Each party to this Agreement, to the extent that it is or becomes an
Indemnifying Party, hereby stipulates that a judgment against the Indemnified
Party shall be conclusive upon the Indemnifying Party. The parties shall
cooperate in the defense of all third party claims which may give rise to
Indemnifiable Claims hereunder. In connection with the defense of any claim,
each party shall make available to the party controlling such defense, any
books, records or other documents within its control that are reasonably
requested in the course of such defense.
(c) TAX ADJUSTMENTS. Any amounts payable by the Indemnifying Party
to or on behalf of an Indemnified Party in respect of a Loss shall be net of tax
effect determined as follows:
(i) If such Indemnified Party is liable for any additional
Taxes as a result of the payment of amounts in respect of an Indemnifiable
Claim, the Indemnifying Party will pay to the Indemnified Party in addition
to such amounts in respect of the Loss within 10 days after being notified
by the Indemnified Party of the payment of such liability (x) an amount
equal to such additional Taxes (the "Tax Reimbursement Amount") plus
(y) any additional amounts required to pay additional Taxes imposed with
respect to the Tax Reimbursement Amount and with respect to amounts payable
under
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this clause (y), with the result that the Indemnified Party shall have
received from the Indemnifying Party, net of the payment of Taxes, an
amount equal to the Loss.
(ii) The Indemnified Party shall reimburse the Indemnifying
Party an amount equal to the net reduction in any year in the liability for
Taxes (that are based upon or measured by income) of the Indemnified Party
or any member of a consolidated or combined tax group of which the
Indemnified Party is, or was at any time, part, which reduction is actually
realized with respect to any period after the Closing Date and which
reduction would not have been realized but for the amounts paid (or any
audit adjustment or deficiency with respect thereto, if applicable) in
respect of a Loss, or amounts paid by the Indemnified Party pursuant to
this paragraph (a "Net Tax Benefit"). The amount of any Net Tax Benefit
shall be paid not later than 15 days after the date on which such Net Tax
Benefit shall be realized. For purposes of this clause 9.4(c)(ii), the Net
Tax Benefit shall be deemed to be actually realized on the date on which
such Net Tax Benefit is used to compute an obligation to pay installments
of estimated tax or, if earlier, reported earnings; PROVIDED, HOWEVER, that
if the amount of any Net Tax Benefit is subsequently affected by reason of
any event or events, including, without limitation, any payment of Taxes by
such Indemnified Party with respect to the loss of such Net Tax Benefit
upon audit or litigation, appropriate adjustments and payments to take into
account the increase or decrease in such Net Tax Benefit shall be made
between the Indemnified Party and the Indemnifying Party within 15 days
after such event or events. Any expenses associated with the realization
of a Net Tax Benefit or any contest or proceeding with respect to a Net Tax
Benefit shall be deemed to reduce such Net Tax Benefit. Buyer agrees to
provide Seller or its designated representatives with such assistance and
such documents and records reasonably requested by them that are relevant
to their ability to determine whether a Net Tax Benefit has been realized
including but not limited to copies of Tax Returns, estimated tax payments,
schedules, and related supporting documents.
(d) INSURANCE MATTERS.
(i) The provisions of this Article are subject to the rights
of any Indemnified Party's insurer which may be defending any such claim.
Nothing in this Section 9.4 shall be deemed to obligate any person to
maintain any insurance or to pursue any claim against any insurer or third
party, other than the tender of insurance claims referred to in Section
9.4(d)(ii) below.
(ii) Upon the incurrence of any Loss that (A) would be the
subject of an indemnification responsibility under this Article 9 if not
covered by insurance and (B) is likely to be insured, the Person suffering
the Loss shall file a timely claim with its insurer. The Loss shall be
deemed "not covered by insurance" for purposes of this Agreement if such
insurer denies the claim, either upon tender or thereafter, or fails to
accept the claim. The Company agrees to permit Seller to contest any
denied or unaccepted claim at Seller's sole expense; however, Seller may
not delay any indemnification payments otherwise required by this Section 9
during the pendency of such contest.
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9.5 SURVIVAL. This Article 9 shall survive any termination of this
Agreement. This indemnification further shall survive the Closing and shall
remain in effect indefinitely, except as to indemnification provided under
Section 9.1(a) and Section 9.2(a) (regarding indemnification for breaches of
representations and warranties) as to which the indemnification obligations
hereunder shall remain in effect only for the periods specified in Section 8.4
as to each representation and warranty (as the same may be extended by Section
8.4(d)). Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved at the end of any applicable
limitation period shall continue to be covered by this Article 9 notwithstanding
any applicable statute of limitations (which the parties hereby waive) until
such matter is finally terminated or otherwise resolved by the parties or by a
court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid.
9.6 NOTICE. Each party agrees to notify the other parties of any
liabilities, claims or misrepresentations, breaches or other matters covered by
this Article 9 upon discovery or receipt of notice thereof (other than from such
other parties), whether before or after Closing.
9.7 NOT EXCLUSIVE REMEDY. This Article 9 shall not be deemed to
preclude or otherwise limit in any way the exercise of any other rights or
pursuit of other remedies for the breach of this Agreement or with respect to
any intentional misrepresentation.
9.8 CERTAIN OFFSET PROHIBITED. Without limiting any other rights
and remedies of Buyer or Western (whether under this Agreement or applicable
Law), if any matter as to which Buyer or Western may be able to assert a claim
under this Agreement is pending or unresolved at the time any distribution
(including conversion rights) is due from the DownREIT to the Electing
Stockholders, Western and the DownREIT shall not have the right to withhold from
such distribution any part of the amount of such claim.
9.9 SELLING STOCKHOLDERS' PROPORTIONATE LIABILITY. Selling
Stockholders agree that Buyer may assert a claim against one or more Selling
Stockholders (without any obligation to assert such claim against all Selling
Stockholders or any other Selling Stockholder) arising under this Agreement.
With reference to matters affecting the Company generally, as distinguished from
a particular Selling Stockholder individually, the obligation of each Selling
Stockholder shall be proportionate to the extent of their interests set forth in
Section 4 of the Settlement Agreement. With reference to matters affecting a
particular Selling Stockholder individually, Buyer may, but shall not be
obligated to, seek recovery of the entire claim directly from such Selling
Stockholder.
9.10 LIMITATION ON OBLIGATIONS. Notwithstanding anything to the
contrary contained in this Agreement:
(a) DE MINIMIS THRESHOLDS. Except with respect to the following
sentence, Seller shall have no liability under this Agreement for Losses less
than Fifty Thousand Dollars ($50,000) in the aggregate. With respect to Section
2.7(q) only, Seller shall have no liability under Section 2.7(q) (Construction
of Improvements), or under any indemnification responsibility in respect
thereof, for Losses less than Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate.
67
(b) LIABILITY CAP; SEVERAL AND NOT JOINT. The cumulative liability
of any Selling Stockholder to Buyer or Western for (i) any breach of any
representation or warranty (other than Section 2.27 (Settlement Agreement)) made
in or pursuant to this Agreement and (ii) any indemnification obligation under
Section 9.1(a) (representations and warranties), including, without limitation,
defense costs and tax adjustment costs in respect thereof under Section 9.4, and
(iii) any increase in the Environmental Reserve between the preliminary Closing
Balance Sheet and the Final Closing Balance Sheet, shall not exceed five percent
(5%) of the portion of the Pre-Redemption Purchase Price (whether paid in cash
or DownREIT Units) allocated to such Selling Stockholder pursuant to the formula
contained in Section 4 of the Settlement Agreement (as allocated by the
Representative or fixed pursuant to dispute resolution procedures in the
Settlement Agreement) and shall be several and not joint.
9.11 LIMITATION ON OBLIGATIONS OF THE COMPANY. The Company's
representations, warranties, and covenants hereunder are SOLELY for the benefit
of Buyer and Western. Notwithstanding anything to the contrary contained
herein, after the Closing neither the Company nor its Subsidiaries shall be
jointly or severally liable with Seller (or any Selling Stockholder) in
connection with any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by the Company, Seller
(or any Selling Stockholder) in or pursuant to this Agreement. Any such
inaccuracy in representations of or any breach by the Company shall have no
effect on the obligations of Seller (or any Selling Stockholder) to Buyer
hereunder.
ARTICLE 10
GENERAL
10.1 AMENDMENTS; WAIVERS. This Agreement and any schedule or exhibit
attached to this Agreement may be amended only by agreement in writing of all
parties, provided that the Representative may execute any such amendment on
behalf of the Selling Stockholders. No waiver of any provision nor consent to
any exception to the terms of this Agreement or any agreement contemplated
hereby shall be effective unless in writing and signed by the party to be bound
and then only to the specific purpose, extent and instance so provided.
10.2 SCHEDULES; EXHIBITS; INTEGRATION. Each schedule and exhibit
delivered pursuant to the terms of this Agreement shall be in writing and shall
constitute a part of this Agreement, although schedules need not be attached to
each copy of this Agreement. This Agreement (together with such schedules and
exhibits) constitutes the entire agreement among the parties pertaining to the
subject matter of this Agreement and supersedes all prior agreements and
understandings of the parties in connection therewith, including, but not
limited to, the letter of intent dated June 15, 1998, between the Company and
Western.
10.3 BEST EFFORTS; FURTHER ASSURANCES.
(a) STANDARD. Each party will use its best efforts to cause all
conditions to its obligations to be timely satisfied and to perform and fulfill
all obligations on its part to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be
effected substantially in accordance with its terms as soon as feasible. The
parties shall cooperate with each other in such actions, including attendance by
the Company
68
in any labor negotiations, and in securing requisite Approvals. Each party
shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
(b) LIMITATION. As used in this Agreement, the term "best efforts"
shall not mean efforts which require the performing party to do any act that is
unreasonable under the circumstances, to make any capital contribution or to
expend any funds other than reasonable out-of-pocket expenses incurred in
satisfying its obligations under this Agreement, including, but not limited to,
the fees, expenses and disbursements of its accountants, actuaries, counsel and
other professionals.
10.4 GOVERNING LAW.
(a) CHOICE OF LAW. This Agreement, the legal relations between the
parties and any Action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, including but not limited to
the negotiation, execution, interpretation, coverage, scope, performance,
breach, termination, validity, or enforceability of this Agreement, shall be
governed by and construed in accordance with the Laws of the State of Oregon
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines, except to the extent that certain matters are
preempted by federal Law or are governed as a matter of controlling Law by the
Law of the jurisdiction of organization of the respective parties.
(b) CONSENT TO JURISDICTION. Each party hereby irrevocably submits
to and accepts for itself and its properties, generally and unconditionally, the
non-exclusive jurisdiction of and service of process pursuant to the Laws of the
State of Oregon and the rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment rendered thereby arising under
or out of in respect of or in connection with this Agreement or any related
document or obligation.
10.5 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under it are assignable except that Buyer may assign its rights
hereunder (including, but not limited to, its rights under Article 9) to any
Affiliate of Buyer (including, without limitation, the DownREIT) or to any
post-Closing purchaser of a substantial part of the assets of the Company.
10.6 HEADINGS. The descriptive headings of the Articles, Sections
and subsections of this Agreement, the titles of the Schedules and the Table of
Contents are for convenience only and do not constitute a part of this
Agreement.
10.7 COUNTERPARTS. This Agreement and any amendment to this
Agreement or any other agreement (or document) delivered pursuant to this
Agreement may be executed in one or more counterparts and by different parties
in separate counterparts. All of such counterparts shall constitute one and the
same agreement (or other document) and shall become effective (unless otherwise
provided therein) when one or more counterparts have been signed by each party
and the applicable signature page thereof delivered to the other party.
Signature pages may be delivered by facsimile.
69
10.8 PUBLICITY AND REPORTS. Seller, the Company and Buyer shall
coordinate all publicity relating to the transactions contemplated by this
Agreement and no party shall issue any press release, publicity statement or
other public notice relating to this Agreement, or the transactions contemplated
by this Agreement, without obtaining the prior consent of both Seller and Buyer
except to the extent that independent legal counsel to Buyer or Seller, as the
case may be, shall deliver a written opinion to the other party that a
particular action is required by applicable Law. Seller shall obtain the prior
consent of Buyer to the form and content of any application or report made to
any Governmental Entity or which relates to this Agreement.
10.9 CONFIDENTIALITY. All information subject to confidentiality
agreements or designated in writing as confidential by any party (or its
representatives) whether before or after the date of this Agreement, in
connection with the transactions contemplated by, or the discussions and
negotiations preceding, this Agreement, to any other party (or its
representatives) shall be kept confidential by such other party and its
representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such information
(i) was known by the recipient when received, (ii) it is or hereafter becomes
lawfully obtainable from other sources, (iii) is necessary or appropriate to
disclose to a Governmental Entity having jurisdiction over the parties, (iv) as
may otherwise be required by Law or (v) to the extent such duty as to
confidentiality is waived in writing by the other party. If this Agreement is
terminated in accordance with its terms, each party shall use all reasonable
efforts to return upon written request from the other party all documents (and
reproductions thereof) received by it or its representatives from such other
party (and, in the case of reproductions, all such reproductions made by the
receiving party) that include information not within the exceptions contained in
the first sentence of this Section 10.9, unless the recipients provide
assurances reasonably satisfactory to the requesting party that such documents
have been destroyed.
10.10 INVESTMENT REPRESENTATION. Buyer is acquiring the Stock from
Seller for Buyer's own account, for investment purposes only and not with a view
to or for sale in connection with the distribution thereof, except for a
possible transfer to an Affiliate of Buyer.
10.11 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement is intended to relieve or discharge the obligation of any third person
to (or to confer any right of subrogation or action over against) any party to
this Agreement.
10.12 PERFORMANCE BY SUBSIDIARIES. Each party agrees to cause its
subsidiaries to comply with any obligations hereunder relating to such
subsidiaries and to cause its subsidiaries to take any other action which may be
necessary or reasonably requested by the other party in order to consummate this
Agreement.
10.13 WESTERN GUARANTY. Subject to the terms and conditions of this
Agreement, Western guarantees Buyer's obligation to pay the Purchase Price at
the Closing.
10.14 NOTICES. Any notice or other communication hereunder must be
given in writing and (a) delivered in person, (b) transmitted by telex, telecopy
or telecommunications
70
mechanism or (c) mailed by certified or registered mail, postage prepaid,
receipt requested as follows:
If to Buyer, addressed to:
Western Real Estate Services, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Western, addressed to:
Western Investment Real Estate Trust
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
In each case with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Seller, any Selling Stockholder or the Representative, addressed to both
of:
Xxxx Xxxxx, Esq.
Brownstein, Rask, Arenz, Sweeney, Xxxx & Xxxxx LLP
0000 X.X. Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xx. Xxxxx Xxxxxxxx
00000 X.X. Xxxx'x Xxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
71
With a copy to:
Miller, Nash, Wiener, Hager & Xxxxxxx LLP
Attorneys and Counselors at Law
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company, addressed to:
Xxxxxx'x Food Stores, Inc.
0000 X.X. 00xx Xxx.
Xxxxxxxxx, Xxxxxx 00000
Attention: President
Telephone: (000) 000-0000
With a copy, if pre-Closing, to:
Miller, Nash, Wiener, Hager & Xxxxxxx LLP
Attorneys and Counselors at Law
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Or, if post-Closing, with copies to both of:
Western Investment Real Estate Trust
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given
72
by telecommunication, when transmitted to the applicable number so specified in
(or pursuant to) this Section 10.13 and an appropriate confirmation is received,
(ii) if given by mail, three days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if given
by any other means, when actually received at such address.
10.15 EXPENSES. Unless otherwise specifically allocated by this
Agreement, Seller and Buyer and, prior to closing, the Company shall each pay
their own expenses incident to the negotiation, preparation and performance of
this Agreement and the transactions contemplated hereby, including but not
limited to the fees, expenses and disbursements of their respective investment
bankers, accountants and counsel. Company and Buyer shall each pay one half of
the fees of the Escrow Agent. The Company shall pay all expenses incident to
preparing and delivering documents in response to Buyer's due diligence requests
(including, without limitation, all of the items listed in Section 4.1, except
as otherwise set forth therein). Company shall reimburse Buyer on demand for
fifty percent (50%) of the filing fee paid by Buyer as a result of its
Xxxx-Xxxxx-Xxxxxx filing, if any, and Buyer shall reimburse the Company on
demand for fifty percent (50%) of the equipment appraisal fee. All of the
foregoing expenses payable by the Company shall be paid (or a reserve set aside)
by the Company, which payment (or reserve liability) shall be reflected in the
Closing Balance Sheet.
10.16 REMEDIES; WAIVER. To the extent permitted by Law all rights and
remedies existing under this Agreement and any related agreements or documents
are cumulative to and not exclusive of, any rights or remedies otherwise
available under applicable Law. No failure on the part of any party to exercise
or delay in exercising any right hereunder shall be deemed a waiver thereof, nor
shall any single or partial exercise preclude any further or other exercise of
such or any other right.
10.17 ATTORNEY'S FEES. In the event of any Action by any party
arising under or out of, in connection with or in respect of this Agreement,
including any participation in bankruptcy proceedings to enforce against a party
a right or claim in such proceedings and any appellate proceedings, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
expenses incurred in such Action. Attorney's fees incurred in enforcing any
judgment in respect of this Agreement are recoverable as a separate item. The
parties to this Agreement intend that the preceding sentence be severable from
the other provisions of this Agreement, survive any judgment and, to the maximum
extent permitted by Law, not be deemed merged into such judgment.
10.18 KNOWLEDGE CONVENTION. Whenever any statement herein or in any
schedule, exhibit, certificate or other documents delivered to any party
pursuant to this Agreement is made "to its knowledge" or "to its best knowledge"
or words of similar intent or effect of any party or its representative, such
statement shall mean the actual knowledge of such person after reasonable
inquiry.
10.19 REPRESENTATION BY COUNSEL; INTERPRETATION. Seller and Buyer each
acknowledge that each party to this Agreement has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The
73
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of Buyer and Seller.
10.20 SPECIFIC PERFORMANCE. Seller and Buyer each acknowledge that,
in view of the uniqueness of the Business and the transactions contemplated by
this Agreement, each party would not have an adequate remedy at law for money
damages in the event that this Agreement has not been performed in accordance
with its terms, and therefore agrees that the other party shall be entitled to
specific enforcement of the terms of this Agreement in addition to any other
remedy to which it may be entitled, at law or in equity.
10.21 SEVERABILITY. If any provision of this Agreement is determined
to be invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement to the extent permitted by Law shall
remain in full force and effect provided that the essential terms and conditions
of this Agreement for all parties remain valid, binding and enforceable. In
event of any such determination, the parties agree to negotiate in good faith to
modify this Agreement to fulfill as closely as possible the original intents and
purposes of this Agreement. To the extent permitted by Law, the parties hereby
to the same extent waive any provision of Law that renders any provision of this
Agreement prohibited or unenforceable in any respect.
10.22 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to the
contrary elsewhere in this Agreement, no party (or its Affiliates) shall, in any
event, be liable to any other party (or its Affiliates) for any consequential
damages, including, but not limited to, loss of revenue or income, or loss of
business reputation or opportunity relating to the breach or alleged breach of
this Agreement.
[Signature page follows.]
74
IN WITNESS WHEREOF, each of the parties to this Agreement has executed
this Agreement or has caused this Agreement to be executed by its duly
authorized officers, trustees or personal representatives as of the day and year
first above written.
WESTERN REAL ESTATE SERVICES, INC., a
California corporation, as Buyer
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
By: /s/ Xxxxxx X. Xxxx
------------------------------------------
Xxxxxx X. Xxxx
Chief Financial Officer
WESTERN INVESTMENT REAL ESTATE TRUST, a
California business trust, as Western
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
By: /s/ Xxxxxx X. Xxxx
------------------------------------------
Xxxxxx X. Xxxx
Executive Vice President and Chief
Financial Officer
XXXXXX'X FOOD STORES, INC., an Oregon
corporation, as the Company
By: /s/ Xxxx Xxxxx
------------------------------------------
Xxxx Xxxxx
President
By: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
------------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.
Vice President
S-1
XXXXXX X. XXXXXX MARITAL TRUST, an Oregon
trust, as Selling Stockholder
By: /s/ Xxx X. Xxxxxx, III
------------------------------------------
Xxx X. Xxxxxx, III
Co-trustee
By: /s/ Xxxxxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxxxxx X. Xxxxx
Co-trustee
ESTATE OF XXXX XXXXX, as Selling Stockholder
By: /s/ Xxxx Xxxxx
------------------------------------------
Xxxx Xxxxx
Personal Representative
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx
Personal Representative
/s/ X. X. Xxxxxxxx
---------------------------------------------
X. X. XXXXXXXX, as Selling Stockholder
/s/ Xxxxxx Xxxxxx
---------------------------------------------
XXXXXX XXXXXX, as Selling Stockholder
/s/ Xxxxxx X. Xxxxxxxxx, Xx.
---------------------------------------------
XXXXXX X. XXXXXXXXX, XX., as Selling
Stockholder
S-2
/s/ Xxxxxxxxxx X. Xxxxx
---------------------------------------------
XXXXXXXXXX X. XXXXX, as Selling Stockholder
/s/ Xxxxxx Xxxxxx
---------------------------------------------
XXXXXX XXXXXX, as Selling Stockholder
/s/ Xxx X. Xxxxxx, III
---------------------------------------------
XXX X. XXXXXX, III, as Selling Stockholder
/s/ Xxxx X. Xxxxx
---------------------------------------------
XXXX X. XXXXX, as Selling Stockholder
/s/ Xxxxx Xxxxxxxx
---------------------------------------------
XXXXX XXXXXXXX, as Selling Stockholder
S-3
ACKNOWLEDGMENT OF SELLER
(Xxxx Xxxxx, President of Xxxxxx'x Food Stores, Inc.)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by Xxxx
Xxxxx as President of Xxxxxx'x Food Stores, Inc.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxx X. Xxxxxxxxx, Xx., Vice President of Xxxxxx'x Food Stores, Inc.)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by
Xxxxxx X. Xxxxxxxxx, Xx. as Vice President of Xxxxxx'x Food Stores, Inc.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxx X. Xxxxxx, III, Co-Trustee of the Xxxxxx X. Xxxxxx Marital Trust)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 23, 1998, by Xxx
X. Xxxxxx, III as Co-Trustee of the Xxxxxx X. Xxxxxx Marital Trust.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxxxxxx X. Xxxxx, Co-Trustee of the Xxxxxx X. Xxxxxx Marital Trust)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by
Xxxxxxxxxx X. Xxxxx as Co-Trustee of the Xxxxxx X. Xxxxxx Marital Trust.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxx Xxxxx, Personal Representative of the Estate of Xxxx Xxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by Xxxx
Xxxxx as the Personal Representative of the Estate of Xxxx Xxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxx Xxxxxxxx, Personal Representative of the Estate of Xxxx Xxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by Xxxxx
Xxxxxxxx as the Personal Representative of the Estate of Xxxx Xxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(X.X. Xxxxxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by X.X.
Xxxxxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxx Xxxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 21, 1998, by
Xxxxxx Xxxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxx X. Xxxxxxxxx, Xx.)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by
Xxxxxx X. Xxxxxxxxx, Xx..
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxxxxxx X. Xxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by
Xxxxxxxxxx X. Xxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxxx Xxxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Sachnish )
This instrument was acknowledged before me on September 21, 1998, by
Xxxxxx Xxxxxx.
/s/ Xxxxxxx X. Xxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Washington
My commission expires: 1/6/1999
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxx X. Xxxxxx, III)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 23, 1998, by Xxx
X. Xxxxxx, III.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxx X. Xxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by Xxxx
X. Xxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
ACKNOWLEDGMENT OF SELLER
(Xxxxx Xxxxxxxx)
STATE OF OREGON )
) ss.
COUNTY OF Multnomah )
This instrument was acknowledged before me on Sept. 22, 1998, by Xxxxx
Xxxxxxxx.
/s/ Xxxxx X. Xxxxxxxx
[OFFICIAL SEAL] -----------------------------------
Notary Public for Oregon
My commission expires: 4/18/2000
Acknowledgment of Seller
SPOUSAL CONSENT
Each of the undersigned hereby represents and warrants to Buyer that
he or she is the spouse of the Selling Stockholder identified as such below and
that the undersigned has read, understands and agrees to the terms of the Stock
Purchase Agreement and the Exhibits and Schedules attached thereto. The
undersigned hereby consents to such Selling Stockholder's entering into the
Stock Purchase Agreement and to the sale, exchange or contribution of the shares
of Stock of the Company owned by such Selling Stockholder and/or the
undersigned, in any capacity, pursuant thereto. The undersigned hereby agrees
that Buyer, or its nominee, will acquire such shares of the Company's Stock
pursuant to the Stock Purchase Agreement free and clear of any right, interest
or claim of the undersigned and that any property of such Selling Stockholder
that is or may be subject to marital property rights of the undersigned shall be
bound by the Stock Purchase Agreement.
By:
--------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------
(Spouse of Xxxxxx Xxxxxx)
By:
--------------------------------
Name:
------------------------------
(Spouse of Xxx X. Xxxxxx, III)
Spousal Consent
SPOUSAL CONSENT
Each of the undersigned hereby represents and warrants to Buyer that
he or she is the spouse of the Selling Stockholder identified as such below and
that the undersigned has read, understands and agrees to the terms of the Stock
Purchase Agreement and the Exhibits and Schedules attached thereto. The
undersigned hereby consents to such Selling Stockholder's entering into the
Stock Purchase Agreement and to the sale, exchange or contribution of the shares
of Stock of the Company owned by such Selling Stockholder and/or the
undersigned, in any capacity, pursuant thereto. The undersigned hereby agrees
that Buyer, or its nominee, will acquire such shares of the Company's Stock
pursuant to the Stock Purchase Agreement free and clear of any right, interest
or claim of the undersigned and that any property of such Selling Stockholder
that is or may be subject to marital property rights of the undersigned shall be
bound by the Stock Purchase Agreement.
By:
-------------------------------------
Name: Xxxxxxx Xxxxx Xxxxxx
-----------------------------------
(Spouse of Xxxxxx X. Xxxxxx III)
Spousal Consent
SCHEDULE 1.0
SELLING STOCKHOLDERS
Number
of Shares
-----------
Xxxxxx X. Xxxxxx Marital Trust(1) 2,400
Estate of Xxxx Xxxxx(2) 26,268
X. X. Xxxxxxxx, an individual. . . . . . . . . . . . . . . . . . . . . 732
Xxxxxx Xxxxxx, an individual . . . . . . . . . . . . . . . . . . . . . 100
Xxxxxx X. Xxxxxxxxx, Xx., an individual. . . . . . . . . . . . . . . . 100
Xxxxxxxxxx X. Xxxxx, an individual . . . . . . . . . . . . . . . . . . 1,025
Xxxxxx Xxxxxx, an individual . . . . . . . . . . . . . . . . . . . . . 1,025
Xxx X. Xxxxxx, III, an individual. . . . . . . . . . . . . . . . . . . 1,645
Xxxx X. Xxxxx, an individual . . . . . . . . . . . . . . . . . . . . . 100
Xxxxx Xxxxxxxx, an individual. . . . . . . . . . . . . . . . . . . . . 100
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . .33,495
____________________
1 Current legal owner of stock certificate number 21 which bears the
name and is registered to "XXXX XXXXX and XXX X. XXXXXX, III, Trustees under the
Last Will and Testament of Xxx X. Xxxxxx, Deceased." The income beneficiary of
the Xxxxxx X. Xxxxxx Marital Trust is Xxxxxxxxx X. Xxxxxx; there are no other
beneficiaries.
2 Current legal and beneficial owner of stock certificate number 29
which bears the name and is registered to "XXXX XXXXX."
Schedule 1.0 - Page 1 of 1
SCHEDULE 1.4
XXXXXX'X FOOD STORES ESTIMATED CLOSING PURCHASE BALANCE SHEET*
ASSETS
Cash $11,982,499
Accounts Receivable $ 68,116
Accrued Interest Receivable $ 150,000
Inventory $ 3,118,937
Prepaid Expenses $ 81,174
Deferred Charges, Net $ 0
Certificates of Deposit $ 305,000
United Grocers Stock $ 517,494
Notes Receivable $ 168,684
Real Estate $36,361,446
Furniture, Fixtures, Equipment & Leaseholds $ 630,000
Blue Sky Money $ 5,500,000
TOTAL ASSETS $58,883,350
LIABILITIES
Accounts Payable $(1,075,496)
Expenses $ (868,245)
Severance $ (550,000)
Closing Costs $ (700,000)
Lease Deposits $ (96,398)
City of Xxxxxxx LID Assessment $ (171,751)
Taxes $ (415,488)
Worker's Compensation Future Reserve $ (164,142)
Environmental Reserve $ [___]
TOTAL LIABILITIES $(4,041,520)
NET PURCHASE PRICE $54,841,830
* Prepared on September 14, 1998. Amounts shown are estimates of the amounts
applicable on October 30, 1998. Actual numbers in the preliminary Closing
Balance Sheet and in the Final Closing Balance Sheet will be determined and
adjusted as set forth in the Agreement.
Schedule 1.4 - Page 1 of 1
SCHEDULE 2.1
CERTAIN INFORMATION REGARDING THE COMPANY AND SUBSIDIARIES
1. LIST OF SUBSIDIARIES OF THE COMPANY:
1.1 Xxxxxx'x Wholesale Grocery Co.
1.2 Xxxxx'x Road Investments, Inc.
2. THE COMPANY:
2.1 FOREIGN QUALIFICATIONS: none
2.2 DIRECTORS: Xxxx Xxxxx
Xxx X. Xxxxxx III
Xxxxxxxxxx X. Xxxxx
Xxxxxx Xxxxxx
Xxx Xxxxxxxx
2.3 EXECUTIVE OFFICERS: Xxxx Xxxxx, President and Treasurer
Xxxxxx X. Xxxxxxxxx, Xx., Vice President
Xxx X. Xxxxxx, Secretary
3. XXXXXX'X WHOLESALE GROCERY CO.
3.1 CAPITALIZATION: The authorized capital stock consists of
2,000 shares of common stock, $100.00 par value, of which 1712 shares are
issued and outstanding. Such outstanding shares are owned by the following
Person in the following amount:
NAME SHARES
Xxxxxx'x Food Stores, Inc. 1712
3.2 JURISDICTION OF ORGANIZATION: Oregon
3.3 FOREIGN QUALIFICATIONS: none
3.4 DIRECTORS: same as 2.2, above
3.5 EXECUTIVE OFFICERS: same as 2.3, above
4. XXXXX'X ROAD INVESTMENTS, INC.
4.1 CAPITALIZATION: The authorized capital stock consists of
500 shares of common stock, no par value, of which 100 shares are issued
and outstanding. Such outstanding shares are owned by the following Person
in the following amount:
NAME SHARES
Xxxxxx'x Food Stores, Inc. 100
4.2 JURISDICTION OF ORGANIZATION: Oregon
4.3 FOREIGN QUALIFICATIONS: none
4.4 DIRECTORS: see 2.2, above
4.5 EXECUTIVE OFFICERS: see 2.3, above
EXHIBIT A
DOWNREIT INVESTOR SUITABILITY QUESTIONNAIRE
INDIVIDUAL INVESTORS
_____, a Delaware limited partnership (the "Company"), will use the
responses to this questionnaire to qualify prospective investors for purposes of
United States federal and state securities laws. This is not an offer to sell
or the solicitation of an offer to buy securities. Such an offer can be made
only by appropriate offering documentation. Any such offer may be conditioned
upon your qualification as an accredited investor under federal and state
securities laws.
If the answer to the question below is "none" or "not applicable", please
so indicate.
Your answers will be kept confidential at all times. However, by signing
this Questionnaire, you agree that the Company may present this Questionnaire to
such parties as it deems appropriate to establish the availability of exemptions
from registration under state and federal securities laws.
I. GENERAL INFORMATION
1. REGISTRATION OF CERTIFICATE
Name to appear on stock certificate:
---------------------------------------
---------------------------------------------------------------------------
Name of beneficial owner (if different from above):
------------------------
---------------------------------------------------------------------------
If the beneficial owner differs from the registered holder, describe the
relationship:
--------------------------------------------------------------
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---------------------------------------------------------------------------
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Exhibit A - 1
II. INVESTOR INFORMATION
1. PERSONAL
Residence Address:
---------------------------------------------------------
Residence Telephone Number:
------------------------------------------------
Social Security Number:
----------------------------------------------------
Date of Birth:
-------------------------------------------------------------
2. BUSINESS
Occupation:
----------------------------------------------------------------
Number of Years:
-----------------------------------------------------------
Present Employer:
----------------------------------------------------------
Position/Title:
------------------------------------------------------------
Business Address:
----------------------------------------------------------
---------------------------------------------------------------------------
3. INCOME
INDIVIDUAL INCOME
(a) Do you expect that your individual annual gross income for the current
calendar year will be more than $200,000?
[ ] Yes [ ] No
(b) Was your individual annual gross income last calendar year more than
$200,000?
[ ] Yes [ ] No
(c) Was your individual annual gross income two calendar years ago more
than $200,000?
[ ] Yes [ ] No
Exhibit A - 2
JOINT INCOME WITH SPOUSE
(a) Do you expect that the joint annual gross income of you and your
spouse for the current calendar year will be more than $300,000?
[ ] Yes [ ] No
(b) Was the joint annual gross income of you and your spouse in the last
calendar year more than $300,000?
[ ] Yes [ ] No
(c) Was the joint annual gross income of you and your spouse two calendar
years ago more than $300,000?
[ ] Yes [ ] No
4. NET WORTH
(a) Currently, is your net worth, together with the net worth* of your
spouse, if applicable, in excess of $1,000,000?
[ ] Yes [ ] No
* "Net worth" may include principal residence, net of encumbrances, at
either cost or appraised value, and furnishings and automobiles.
5. EDUCATION
Please describe your educational background and degrees obtained, if any.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Exhibit A - 3
6. INVESTMENT EXPERIENCE
(a) Please describe briefly principal jobs held during the last five
years. Specific employers need not be identified. What is sought is
a sufficient description to permit a determination concerning the
extent of your experience in financial and business matters.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) Please indicate the frequency of your investment in marketable
securities:
[ ] often; [ ] occasionally; [ ] seldom; [ ] never
(c) Please indicate the number of times you have invested in securities in
which no market is made:
[ ] five or more; [ ] 1 or more, but fewer than five; [ ] none
7. RELATIONSHIP TO THE COMPANY
Please briefly describe the nature of any relationship you may already have
with the Company or any of its directors or officers, including the
appropriate date when such relationship began.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Exhibit A - 4
8. ADVISORS
In evaluating this investment, will you use the services of any advisor?
[ ] No, I will not use the services of any advisor
[ ] Yes, I will use the services of the advisor(s) identified below:
(a) ACCOUNTANT/FINANCIAL ADVISOR
Name
-----------------------------------------------------------------------
Address
--------------------------------------------------------------------
City State/Province
---------------------------------------- ----------------
Zip/Postal Code Telephone
------------------- -------------------------------
(b) ATTORNEY
Name
-----------------------------------------------------------------------
Address
--------------------------------------------------------------------
City State/Province
---------------------------------------- ----------------
Zip/Postal Code Telephone
------------------- -------------------------------
ANY PERSONS IDENTIFIED IN THIS SECTION 8 SHOULD COMPLETE A "STATEMENT OF
QUALIFICATIONS OF PROFESSIONAL ADVISOR," THE FORM OF WHICH IS ATTACHED
HERETO.
9. REPRESENTATIONS AND WARRANTIES
The undersigned ("you") hereby confirm the accuracy of each of the
representations and warranties below:
(a) You represent that you are an "accredited investor" as such term
is defined in Rule 501 of Regulation D promulgated under the Securities
Exchange Act of 1934, as amended (the "Act"), and that you are able to bear
the economic risk of an investment in the partnership units of the Company
(collectively, the "Shares").
(b) You acknowledge that you have prior investment experience,
including investment in non-registered securities, and the ability and
expertise to evaluate the merits and risks of such an investment on your
behalf.
(c) You hereby represent that you have been furnished by the Company
with all information regarding the Company which you have requested or
desired to know; that you have been afforded the opportunity to ask
questions of, and receive answers
Exhibit A - 5
from, duly authorized officers or other representatives of the Company
concerning the terms and conditions of the private placement offering of
the Shares (the "Offering"), and have received any additional information
which you have requested.
(d) You hereby acknowledge that the offering of Shares has not been
reviewed by, and the fairness of such Shares has not been determined by,
the Commission or any state regulatory authority, since the Offering is
intended to be a nonpublic offering pursuant to Section 4(2) of the Act.
You represent that the Shares being acquired by you are being acquired for
your own account, for investment and not for distribution of the Shares to
others.
(e) You understand that the Shares have not been registered under
the Act or any state securities or "blue sky" laws and are being sold in
reliance on exemptions from the registration requirements of the Act and
such laws.
(f) You have adequate means of providing for your current needs and
possible personal contingencies without relying on the sale of the Shares
in the foreseeable future.
(g) You either (i) have a pre-existing personal or business
relationship with the Company or its partners, officers, directors or
controlling persons or (ii) by reason of your business or financial
experience or the business or financial experience of your professional
advisors who are unaffiliated with and who are not compensated by the
Company or any affiliate or selling agent of the Company, directly or
indirectly, you have the capacity to protect your own interests in
connection with your acquisition of the Shares.
(h) The Company may rely, and shall be protected in acting upon, any
papers or other documents which may be submitted to it by you in connection
with the Shares and which are believed by it to be genuine and to have been
signed or presented by the proper party or parties, and the Company shall
not have any liability or responsibility with respect to the form,
execution or validity thereof.
[Signature page follows.]
Exhibit A - 6
III. SIGNATURE
The above information is true and correct in all material respects and the
undersigned recognizes that the Company and its counsel are relying on the truth
and accuracy of such information in relying on an exemption from the
registration requirements of the Securities Act of 1933, as amended, and in
determining applicable state securities laws and relying on exemptions contained
therein. The undersigned agrees to notify the Company promptly of any changes
in the foregoing information which may occur prior to the investment.
Executed at , on .
------------------- --------------------
(city) (date)
-------------------------------------
(Signature)
-------------------------------------
(Print Name)
Exhibit A - 7
STATEMENT OF QUALIFICATIONS OF PROFESSIONAL ADVISOR
[date]
I have been engaged to act and have acted as a professional advisor to
[names] shareholders of Xxxxxx'x Food Stores, Inc. (the "Company") in connection
with the issuance of shares of partnership interest of [the DownREIT] (the
"DownREIT") in exchange for shares of common stock of the Company pursuant to
that certain Stock Purchase and Contribution Agreement by and among Western Real
Estate Services, Inc. ("Buyer"), Western Investment Real Estate Trust
("Western"), the Company and the shareholders of Company listed in Schedule 1.0
thereto (the "Agreement"). My qualifications are summarized in the attached
resume. I have no material relationship with the DownREIT, Buyer, Western or
any of their officers or directors, nor am I a shareholder of or otherwise
affiliated with any of them. I am being compensated for my services solely by
______________.
I understand that in order for the DownREIT and Buyer to rely on the
exemption from qualification contained in Section 25102(f) of the California
Corporate Securities Law of 1968 for the shares of partnership interest that are
to be issued pursuant to the Agreement, certain Company shareholders may need to
be represented by a professional advisor to assist them in evaluating Buyer's
offer. I further understand that a duty of the professional advisor in these
circumstances is to advise the offerees as to the merits and risks of the
prospective investment. As a [Certified Financial Planner] I am customarily
relied upon by others for investment recommendations and advice and am
compensated for providing such services.
In order to act as the professional advisor in this matter, I have
reviewed the Agreement. Further, I have had access to, and have conferred with,
the management of the Company, the DownREIT, Western and Buyer and have had the
opportunity to have any questions answered and to review such additional
documents and materials as I have deemed necessary or advisable in connection
with my services in this transaction.
I have been designated as a professional advisor by and have presented
my evaluation, findings and conclusions concerning the DownREIT, Western, Buyer,
the Company and the transactions contemplated by the Agreement to the
shareholders of Company identified above and have had the opportunity to discuss
and advise such shareholders on the merits and risks of an exchange of their
shares for shares of the DownREIT's partnership interest, and to convey to them
my recommendations in this regard. To the best of my knowledge all of such
shareholders were capable of understanding and did understand such merits, risks
and recommendations, as so explained to them.
Respectfully submitted,
----------------------------------------
[Name]
[Title]
Exhibit A - 8
NON-INDIVIDUAL INVESTORS
_______, a Delaware limited partnership (the "Company"), will use the
responses to this questionnaire to qualify prospective investors for purposes of
United States federal and state securities laws. This is not an offer to sell
or the solicitation of an offer to buy securities. Such an offer can be made
only by appropriate offering documentation. Any such offer may be conditioned
upon your qualification as an accredited investor under federal and state
securities laws.
If the answer to the question below is "none" or "not applicable", please
so indicate.
Your answers will be kept confidential at all times. However, by signing
this Questionnaire, you agree that the Company may present this Questionnaire to
such parties as it deems appropriate to establish the availability of exemptions
from registration under state and federal securities laws.
I. INVESTOR INFORMATION
IF THE PARTNERSHIP UNITS MAY BE REDEEMED FOR COMPANY SHARES BY MORE THAN ONE
AFFILIATED ENTITY, PLEASE COMPLETE A COPY OF THIS QUESTIONNAIRE FOR EACH ENTITY.
1. IDENTIFICATION
Name
-----------------------------------------------------------------------
(Exact name as it will appear on stock certificate)
Address of Principal Place of Business
-------------------------------------
---------------------------------------------------------------------------
Jurisdiction of Formation or Incorporation
---------------------------------
Contact Person
-------------------------------------------------------------
Telephone Number
-----------------------------------------------------------
Facsimile Number
-----------------------------------------------------------
Type of Entity (corporation, partnership, trust, etc.)
---------------------
Taxpayer Identification Number:
--------------------------------------------
Exhibit A - 9
Was entity formed for the purpose of this investment?
Yes ____ No ____
If the answer is yes, all shareholders, partners or other equity owners
must answer Part I of this Questionnaire. If the above answer is no, please
continue completing this form.
2. NET WORTH
Please state the investing entity's net worth at the time the shares would
be purchased:
$________________
3. BUSINESS
Please check the appropriate box to indicate which of the following
accurately describes the nature of the business conducted by the investing
entity:
[ ] private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940 [a U.S. venture capital fund
which invests primarily through private placements in non-publicly
traded securities and makes available (either directly or through
co-investors) to the portfolio companies significant guidance
concerning management, operations or business objectives];
[ ] a Small Business Investment the Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
[ ] an investment company registered under the Investment the Company Act
of 1940 or a business development company as defined in Section
2(a)(48) of that Act;
[ ] a bank as defined in Section 3(a)(2) or a savings and loan association
or other institution defined in Section 3(a)(5)(A) of the Securities
Act of 1933, acting in either an individual or fiduciary capacity;
[ ] an insurance company as defined in Section 2(13) of the Securities Act
of 1933;
[ ] an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 whose investment decision is
made by a fiduciary which is either a bank, savings and loan
association, insurance company, or registered investment advisor, OR
whose total assets exceed $5,000,000, or, if a self-directed plan, a
plan whose investment decisions are made solely by persons who
accredited investors;
Exhibit A - 10
[ ] an organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, a Massachusetts or similar business trust or a
partnership, in each case, not formed for the purpose of this
investment, with total assets in excess of $5,000,000;
[ ] an entity not located in the U.S. and whose equity owners are neither
U.S. citizens nor U.S. residents;
[ ] a trust with total assets in excess of $5,000,000 whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
of the Securities Act of 1933.
[ ] Other. Describe:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
4. INVESTMENT EXPERIENCE
Please provide information detailing the business, financial and investment
experience of the entity and investment manager of such entity.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
5. REPRESENTATIONS AND WARRANTIES
The undersigned ("you") hereby confirm the accuracy of each of the
representations and warranties below:
(a) You are an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), and that you are able to bear the economic risk of
an investment in the partnership interests of the Company (collectively,
the "Shares").
(b) You acknowledge that you have prior investment experience,
including investment in non-registered securities, and the ability and
expertise to evaluate the merits and risks of such an investment on your
behalf.
Exhibit A - 11
(c) You hereby represent that you have been furnished by the Company
with all information regarding the Company which you have requested or
desired to know; that you have been afforded the opportunity to ask
questions of, and receive answers from, duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
private placement offering of the Shares (the "Offering"), and have
received any additional information which you have requested.
(d) You hereby acknowledge that the offering of Shares has not been
reviewed by, and the fairness of such Shares has not been determined by,
the Commission or any state regulatory authority, since the Offering is
intended to be a nonpublic offering pursuant to Section 4(2) of the Act.
You represent that the Shares being acquired by you are being acquired for
your own account, for investment and not for distribution of the Shares to
others.
(e) You understand that the Shares have not been registered under
the Act or any state securities or "blue sky" laws and are being sold in
reliance on exemptions from the registration requirements of the Act and
such laws.
(f) The Company may rely, and shall be protected in acting upon, any
papers or other documents which may be submitted to it by you in connection
with the Shares and which are believed by it to be genuine and to have been
signed or presented by the proper party or parties, and the Company shall
not have any liability or responsibility with respect to the form,
execution or validity thereof.
II. SIGNATURE
The above information is true and correct in all material respects and the
undersigned recognizes that the Company and its counsel are relying on the truth
and accuracy of such information in reliance on the exemption contained in
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The undersigned agrees to notify the Company promptly of
any changes in the foregoing information which may occur prior to the
investment.
Executed at , on .
------------------ --------------------
(city) (date)
----------------------------------------
(Print Name of Entity)
By
--------------------------------------
(Signature)
----------------------------------------
(Print Name)
----------------------------------------
(Print Title of Person Signing)
Exhibit A - 12
EXHIBIT B
FORM OF DOWNREIT PARTNERSHIP AGREEMENT
Exhibit B - 1
EXHIBIT C
FORM OF OPINION OF MILLER, NASH, WIENER, HAGER & XXXXXXX LLP
[Closing Date]
Western Real Estate Services, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Western Investment Real Estate Trust
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Subject: XXXXXX'X FOOD STORES, INC./WESTERN INVESTMENT REAL ESTATE
TRUST
Ladies and Gentlemen:
We have acted as special counsel to Xxxxxx'x Food Stores, Inc., an
Oregon corporation ("the Company"), in connection with the purchase or
contribution of all of the outstanding capital stock of the Company (the
"Stock"), pursuant to the Stock Purchase and Contribution Agreement dated as of
September 3, 1998 (the "Agreement") by and among Western Real Estate Services,
Inc., a California corporation ("Buyer"), Western Investment Real Estate Trust
("Western"), a California trust, the individuals and entities listed in Schedule
1.0 of the Agreement (each a "Selling Stockholder" and, collectively, "Seller")
and the Company. Among other matters, the Agreement provides for the
contribution of a portion of the Stock to a Delaware limited partnership (the
"DownREIT") in which Western is the General Partner. [Name Selling
Stockholders] (the "POA Stockholders") have entered into limited powers of
attorney (the "Powers of Attorney") whereby each names Xxxx Xxxxx his attorney
in fact to execute the Agreement on his or her behalf. This opinion is rendered
to you pursuant to Section 7.2(f) of the Agreement. Capitalized terms used
herein without definition have the same meanings as set forth in the Agreement.
In our capacity as such counsel, we have examined originals, or copies
certified or otherwise identified to our satisfaction as being true copies, of
the Agreement and such records of Seller, the Company and its Subsidiaries,
certificates of public officials, Seller, the Company and its Subsidiaries and
such other documents as we have deemed necessary for the purpose of this
opinion. We have assumed the genuineness of all signatures (other than the
unacknowledged signatures of Seller and the Company on the Agreement), the
authenticity of all items submitted to us as originals, the conformity with
originals of all items submitted to us as copies, the due authority of all
persons executing the same (other than the due authority of the Selling
Stockholders or persons signing on their behalf), and that each natural person
who is a party to the transaction has sufficient capacity to enter into and
carry out his or her obligations under the Agreement (except for purposes of
paragraph 2(c) below). As to material matters of fact, we
Exhibit C - 1
have, when relevant facts were not independently established, relied upon the
statements and certificates furnished to us by Seller, the Company and its
Subsidiaries, copies of each of which are attached to this Opinion. As to the
opinions set forth in paragraph 2 and, with respect to the Selling Stockholders,
paragraph 3, below, we have relied on the opinions of counsel to the Selling
Stockholders attached hereto.
On the basis of such examination and our consideration of such
questions of law as we have deemed relevant in the circumstances, we are of the
opinion, subject to the assumptions, qualifications, and limitations set forth
herein, that:
1. Each of the Company and each of the Subsidiaries has been duly
formed and is validly existing under the laws of the state of Oregon. Each of
the Company and each of the Subsidiaries has the corporate power to own its
properties and conduct its business, and, in the case of the Company, to enter
into and carry out the provisions of the Agreement. The Agreement has been
executed and delivered by the Company.
2. (a) Each Selling Stockholder listed as a trust in Schedule
1.0 to the Agreement is a trust validly existing under the laws of the state of
Oregon; and each such Selling Stockholder has all necessary power to execute,
deliver and perform the Agreement, including the power to transfer, convey and
sell to Buyer or the DownREIT, as applicable, at the Closing the Stock to be
sold or contributed to Buyer or the DownREIT, as applicable, by such Selling
Stockholder; and the execution, delivery and performance of the Agreement by all
such entities have been duly and validly authorized by all necessary trust
action on the part of such Selling Stockholder and its trustees, and the
Agreement has been executed and delivered by such Selling Stockholders.
(b) The Estate of Xxxx Xxxxx (the "Estate") is an estate,
validly existing under the laws of the state of Oregon; and the Estate has all
necessary power and authority to execute, deliver and perform the Agreement,
including the power to transfer, convey and sell to Buyer or the DownREIT, as
applicable, at the Closing the Stock to be sold or contributed to Buyer or the
DownREIT, as applicable, by the Estate; and the execution, delivery and
performance of the Agreement by the Estate have been duly and validly authorized
by all necessary action on the part of the Estate and its personal
representatives and the Agreement has been executed and delivered by the Estate.
The personal representatives of the Estate are Xxxx X. Xxxxx and Xxxxx Xxxxxxxx.
(c) To our knowledge, each Selling Stockholder listed as an
individual in Schedule 1.0 to the Agreement has the full capacity, right, power
and authority to execute, deliver and perform the Agreement and any Power of
Attorney to which he or she is a party, including the capacity, right, power and
authority to transfer, convey and sell to Buyer or the DownREIT, as applicable,
at the Closing the Stock to be sold or contributed to Buyer or the DownREIT, as
applicable, by such Selling Stockholder. The Agreement has been executed and
delivered by or on behalf of each such Selling Stockholder. The Powers of
Attorney have been executed and delivered by each POA Stockholder.
3. Neither the execution, delivery and performance of the Agreement
or any Power of Attorney to which he, she or it is a party nor the consummation
of the purchase and sale transactions contemplated thereby will (a) conflict
with or result in a breach by any Selling
Exhibit C - 2
Stockholder, the Company or any of its Subsidiaries or constitute a default
under, (i) the Articles of Incorporation or Bylaws or trust agreement, as
applicable, of any Selling Stockholder that is a trust, or of the Company, or
any Subsidiary or (ii) any Material Contract known to us to which any Selling
Stockholder, the Company or any of its Subsidiaries is a party or is bound, or
(b) result in the imposition of any Encumbrance against any asset of the Company
or any Subsidiary (except as expressly contemplated by the Agreement), or
violate any Order or Law applicable to Seller, the Company or any Subsidiary or
any of their respective assets of which we are aware.
4. The Powers of Attorney confer on Xxxx Xxxxx legal authority to
sign the Agreement on behalf of each POA Stockholder.
5. Based solely, with your consent, upon a review of records
certified to us as the corporate minute and stock record books of the Company
(with respect to the opinions given in 5(a) and 5(b)), and upon the certificates
attached hereto: (a) the Company has 33,495 shares of common stock issued and
outstanding, (b) all such shares are held of record and beneficially as set
forth in Schedule 1.0 to the Agreement, (c) the outstanding shares have been
duly authorized by all necessary corporate actions on the part of the Company
and are validly issued, fully paid and nonassessable, (d) the holders of the
common stock of the Company do not possess any preemptive rights to subscribe to
any issued shares of the capital stock of the Company, and (e) to our knowledge,
the authorized shares of capital stock of the Company are not subject to any
warrants, options, rights or commitments granted by Seller or the Company, and
neither the Company nor any Subsidiary is obligated to issue, purchase or redeem
any shares of its capital stock.
6. Upon payment for and delivery of the Stock in accordance with
the terms of the Agreement, assuming Buyer and its nominee (if applicable) and
the DownREIT (if applicable) are acquiring the Stock in good faith, for value,
without notice of any adverse claim, Buyer, its nominee and the DownREIT (as
applicable) will each acquire its interest in the Stock free and clear of any
adverse claim (as defined in Oregon Revised Statutes 78.1020(1)(a)) and, to our
knowledge, free and clear of all Encumbrances.
7. Except for those Approvals and Permits that have been obtained
and compliance with Oregon Liquor Control Commission and Oregon Lottery
Commission stock transfer notice requirements, the consummation of the sale of
the Stock by Seller pursuant to the Agreement and the performance of the
Agreement by the Company and Seller do not require any Approval of or any Permit
from any Governmental Entity or, to our knowledge, any other person or entity.
8. Assuming the accuracy of Buyer's representations in Section
10.10 of the Agreement, and the accuracy of each Electing Stockholder's
representations in its Investor Suitability Questionnaire, it is not necessary
in connection with (a) the sale or contribution, as the case may be, and
delivery of the Stock to Buyer and DownREIT, as applicable, or (b) the delivery
of DownREIT Units to the Electing Stockholders in exchange for shares of Stock,
in each case under the circumstances contemplated by the Agreement, to register
either the Stock or the DownREIT Units under the Securities Act of 1933, as
amended, or to qualify the offer or sale of the Stock or the DownREIT Units
under the Oregon state securities laws.
Exhibit C - 3
With respect to the portions of paragraphs 2, 3, 5, 6 and 7 which are
stated to be based on our knowledge, we are relying, with your consent, upon
such certificates as to factual matters as we have deemed appropriate and upon
inquiries as to the current actual knowledge of attorneys presently with our
firm who have within the past year given substantive attention to matters on
behalf of Company or any of its Subsidiaries or the Selling Stockholders, in the
form of legal consultation or legal representation. Except to the extent
otherwise set forth above, we have not made an independent review or
investigation of any of the operations, transactions, contractual arrangements,
orders, litigation, proceedings or investigations pertaining to the Company or
to Seller for purposes of this opinion, and any limited inquiry undertaken by us
during the preparation of this opinion letter should not be regarded as such a
review or investigation.
We express no opinion concerning (a) the laws of any jurisdiction
other than Oregon and the United States, or (b) choice of law or antitrust law
matters (including matters under the Xxxx-Xxxxx-Xxxxxx Act) or, except for the
opinions in paragraph 8, securities matters.
We hereby represent to you that, except as set forth in SCHEDULE 1
attached to this opinion, we have not given substantive attention on behalf of
the Company or any Subsidiary to, or represented the Company or any Subsidiary
in connection with, any pending or threatened actions, suits, proceedings or
investigations against or affecting the Company or any Subsidiary in any court
or by or before any arbitrator or Governmental Entity, but we call your
attention to the fact that our engagement is limited to specific matters as to
which we are consulted by the Company and any Subsidiary.
This opinion is solely for the benefit of Buyer, DownREIT and Western
in connection with the acquisition of the Stock and related transactions and may
not be relied upon by, nor may copies be delivered to, any other Person, firm or
entity or for any other purpose, without our prior written consent, except that
it may be relied upon by O'Melveny & Xxxxx LLP for the opinions such firm
renders in connection with the transactions contemplated by the Agreement.
Very truly yours,
Exhibit C - 4
EXHIBIT D
SUBSTANCE OF LETTER OF XXXXX WHITE XXXXXXXX & XXXX LLP
1. We are independent certified public accountants with respect to
the Company and its Subsidiaries within the meaning of the Securities Act of
1933 (the "Act") and the applicable published rules and regulations and:
2. On the basis of a reading of the latest available respective
interim financial statements of the Company and its Subsidiaries, inquiries of
officials of the Company and its Subsidiaries responsible for financial and
accounting matters and the performance of other specified agreed-upon
procedures, nothing came to our attention that caused us to believe that:
(a) the respective unaudited financial statements of the Company and
its Subsidiaries dated as of [end of month prior to closing] delivered to
Buyer (the "Unaudited Statements") are not presented in conformity with
generally accepted accounting principles applied on a basis consistent with
that of the respective reviewed financial statements of the Company and its
Subsidiaries, dated as of November 29, 1997; or
(b) at the date of the latest available balance sheet read by us, or
at a subsequent specified date not more than five days prior to the date
hereof, there was any material or significant decrease in stockholders'
equity, tangible net worth, total assets, or total [specify types of
reserves] or any increase in indebtedness, [deferred revenue,] accrued
income taxes of the Company or at the date of the latest available income
statement read by us, there was any material or significant decrease in
earnings as compared with amounts shown on the unaudited statements.
3. On the basis of a limited review of federal and state income tax
returns of the Company, inquiries of officials of the Company responsible for
tax matters and other specified procedures, nothing has come to our attention
which has caused us to believe that Taxes, in all material respects, have not
been paid or adequately provided for on the books and records of the Company and
its Subsidiaries, as appropriate, for the periods covered thereby. In addition,
we have also performed a limited review to ascertain the amount of applicable
federal and state income taxes for the period _________________, 19__ to the
latest of such financial statements and have determined that either such taxes
have been paid or adequate reserves have been established for payment of such
taxes.
Exhibit D - 1
EXHIBIT E
SURVEYOR'S CERTIFICATION AND SPECIFICATIONS
I hereby certify to WESTERN REAL ESTATE SERVICES, INC., WESTERN INVESTMENT REAL
ESTATE TRUST, O'MELVENY & XXXXX and [_____] TITLE INSURANCE COMPANY (i) that the
survey was prepared by me and was actually made on the ground pursuant to the
record description of the Property (hereinafter defined); (ii) that the survey
and information, courses and distances shown hereon are correct; (iii) that the
title lines and lines of actual possession are the same; (iv) that the survey
correctly shows hereon the fixed and determinable location of the Property
(including the position of the point of beginning); (v) that the survey reflects
boundary lines of the Property which "close by engineering calculation"; (vi)
that the survey correctly shows the size, location and type of all buildings,
structures and other improvements situated on the Property; (vii) that there are
no specific set-back lines established by the City of _____ other than the
graphical building locations shown on the approved Precise Development Plan for
the Property on file at the City of _____; (viii) that all zoning, use and
density classifications are properly shown hereon and, after due inquiry, there
are no known violations of zoning ordinances, restrictions or other rules and
regulations with reference to the location of said buildings, structures and
improvements; (ix) that all driveways and other cuts in the curb along any
street upon which the Property abuts are correct as shown; (x) that, except as
shown, there are no easements, rights-of-way or uses with respect to which the
undersigned has been advised, no party walls, no encroachments on adjoining
property, streets or alleys by any of said buildings, structures or other
improvements, and no encroachments on the Property by buildings, structures, or
other improvements situated on adjoining property; (xi) that the Notes and
Details hereon identify any violations of building restrictions and set-back
lines and identify any party walls, encroachments, or over-hangs of any
buildings, structures or other improvements upon any easements, rights-of-way or
adjacent land; (xii) that the location and direction of all storm drainage
systems for the collection and disposal of all roof and surface drainage and any
discharge into streams, rivers, canals, culverts or other conveyance system is
depicted hereon; (xiii) that all utility services required for the operation of
the Property either enter the Property through adjoining public streets or the
survey shows the point-of-entry and location of any utilities which pass through
or are located on adjoining private land; (xiv) that any utility transformers
labelled as containing PCBs are specifically noted; (xv) that any and all xxxxx
(dry or otherwise), soil borings and underground and above-ground tanks located
at the property are specifically noted; (xvi) that the Property is located
within flood hazard areas in accordance with any maps entitled: "Department of
Housing and Urban Development, Federal Insurance Administration Special Flood
Hazard Area Maps," "Flood Insurance Rate Map," "Flood Hazard Boundary Map" and
"Floodway Map," as more particularly described in the Notes hereon; (xvii) that
the Property and only the Property constitutes one or more discrete tax lots and
the tax parcel numbers are shown hereon; (xviii) and that the certifications
made herein have been made after a careful physical inspection of the Property.
The undersigned has received and examined a copy of the Commitment to
Insure, issued by _____ Title Insurance Company, the Title Company for the
property described therein (the "Property"), and of each instrument listed
therein, and the location of each easement and exception, to the extent it can
be located, has (with recording reference) been shown thereon, and
Exhibit E - 1
if such easement cannot be sufficiently located, a notation thereof has been
made on the survey. This map or plat and the survey on which it is based has
been made in accordance with the "Minimum Standard Detail Requirements for Land
Title Surveys" jointly established by the American Land Title Association and
American Congress on Surveying and Mapping in 1992 and meets the accuracy
standards of an "Urban" survey as defined in the current accuracy standards
adopted by ALTA and ACSM, and additionally includes items 2,3,4,6,10 and 11 of
Table A thereof.
Name:
------------------------------
Registered Land Surveyor
Registration No.
-------------------
[Seal]
Date:
------------------------------
Exhibit E - 2
EXHIBIT F
FORM OF TENANT'S ESTOPPEL CERTIFICATE
Western Real Estate Services, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Western Investment Real Estate Trust
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Re: TENANT'S ESTOPPEL CERTIFICATE AND AGREEMENT
Ladies and Gentlemen:
The undersigned is giving this letter to you in connection with the
sale (or contribution) of stock by the stockholders of Xxxxxx'x Food Stores,
Inc., the Lessor under that certain lease described herein, of their right,
title and interest in and to such stock with the understanding that you will
rely on this statement in acquiring said stock. You are entitled to rely upon
the statements contained herein.
The undersigned hereby represents, warrants, covenants and certifies
as follows:
1. That it is the tenant of the premises demised under that certain
Lease, dated as of _____ ____, 19___, executed by __________________, as lessor
("Lessor"), and _________________________, as tenant ("Tenant"), a true, correct
and complete copy of which, together with all amendments, modifications and
supplements thereto and extensions and renewals thereof, if any, is attached
hereto (collectively, the "Lease").
2. That the Lease is in full force and effect, and there are no
amendments, modifications, waivers or supplements, whether written or oral,
thereto, except as attached hereto.
3. That the Lease constitutes the sole and entire agreement between
the undersigned Tenant and the Lessor with respect to the property described
therein.
4. That Lessor is not in any respect in default in the performance of
its obligations under the Lease, nor is there any circumstance which, with the
giving of notice or the passage of time, or both, would constitute a default
under the Lease by the undersigned or Lessor. Tenant has not, nor, to the best
of Tenant's knowledge, has Lessor, assigned, transferred or hypothecated its
interest (or any part thereof) under the Lease or further leased or subleased
all or any portion of the demised premises.
Exhibit F - 1
5. That the term of the Lease commenced on __________, 19___, and
will expire on __________, _____, subject to Tenant's rights to extend the term
thereof as set forth therein. Tenant has accepted possession of the premises
described in the Lease (unconditionally and without qualification) and continues
to occupy the same.
6. That the monthly rental payable under the Lease is $____________;
[that such monthly rental will increase to $______ on ________, 19____;] that
rent is due on the [first day of each month] for the duration of the term of the
Lease; and that the current term of the Lease expires on __________[; and that
Tenant has an option to extend or renew the Lease for ______ [list number and
length of terms].
7. That the security deposit under the Lease is $_______; that the
Lessor has received the full amount of such deposit; that there are no
circumstances known to the Tenant entitling the Lessor to apply all or any
portion of said security deposit; and that the Lessor has not heretofore applied
all or any portion of said security deposit.
8. That all improvements to be completed under the Lease have been
completed in accordance with the provisions of the Lease, and that as of the
date hereof no condition has occurred or remains unfulfilled that would allow
cancellation or termination of the Lease by either party thereto or the
suspension of any rent or other payment whatsoever.
9. That, to the knowledge of the undersigned, all applicable zoning,
environmental and other land use regulations, and all covenants, conditions and
restrictions affecting the demised premises, including without limitation those
contained in any mortgage or deed of trust, have been and are presently being
complied with.
10. That the undersigned has no knowledge of any processing, use,
storage, disposal, presence, release or treatment of any hazardous or toxic
materials or substances on or about the leased premises, except as set forth
below and except for normal cleaning substances used in the ordinary course of
business and not in violation of any environmental laws.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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11. That Lessor has satisfied all commitments (economic and
otherwise) made to induce Tenant to enter into the Lease.
12. That there are no offsets or credits against rentals or other
payments payable under the Lease.
Exhibit F - 2
This certificate and agreement shall bind the undersigned and the
successors and assigns of the undersigned and shall inure to the benefit of your
successors and assigns.
Dated:
-------------------
Tenant
-----------------------------------
By:
--------------------------------
Its:
-------------------------------
Exhibit F - 3
EXHIBIT G
FORM OF CERTIFICATE
Western Real Estate Services, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Western Investment Real Estate Trust
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Re: CERTIFICATE AND AGREEMENT
Ladies and Gentlemen:
The undersigned is giving this letter to you in connection with the
sale (or contribution) of stock by the stockholders of Xxxxxx'x Food Stores,
Inc., the Lessee under that certain lease described herein, of their right,
title and interest in and to such stock with the understanding that you will
rely on this statement in acquiring said stock. You are entitled to rely upon
the statements contained herein.
The undersigned hereby represents, warrants, covenants and certifies
as follows:
1. That it is the sole fee owner of the premises demised under that
certain Lease, dated as of _____ ____, 19___, executed by __________________, as
lessor ("Lessor"), and _________________________, as tenant ("Tenant"), a true,
correct and complete copy of which, together with all amendments, modifications
and supplements thereto and extensions and renewals thereof, if any, is attached
hereto (collectively, the "Lease").
2. That the Lease is in full force and effect, and there are no
amendments, modifications, waivers or supplements, whether written or oral,
thereto, except as attached hereto.
3. That the Lease constitutes the sole and entire agreement between
the undersigned Lessor and Tenant with respect to the property described
therein.
4. That Tenant is not in any respect in default in the performance of
its obligations under the Lease, nor is there any circumstance which, with the
giving of notice or the passage of time, or both, would constitute a default
under the Lease by the undersigned or Tenant. Lessor has not, nor to the best
of Lessor's knowledge has Tenant, assigned, transferred or hypothecated its
interest (or any part thereof) under the Lease or further leased or subleased
all or any portion of the demised premises.
Exhibit G - 1
5. That the term of the Lease commenced on __________, 19___, and
will expire on __________, _____, [subject to Tenant's rights to extend the term
thereof as set forth therein.] Tenant has accepted possession of the premises
described in the Lease and continues to occupy the same unconditionally and
without qualification.
6. That the monthly rental payable under the Lease is $____________;
[that such monthly rental will increase to $______ on ________, 19____;] that
rent is due on the [first day of each month] for the duration of the term of the
Lease; and that the current term of the Lease expires on __________[; and that
Tenant has an option to extend or renew the Lease for ______ [list number and
length of terms].
7. That the security deposit under the Lease is $_______; that the
Lessor has received the full amount of such deposit; that there are no
circumstances known to the Lessor entitling the Lessor to apply all or any
portion of said security deposit; and that the Lessor has not heretofore applied
all or any portion of said security deposit.
8. That all improvements to be completed under the Lease have been
completed in accordance with the provisions of the Lease, and that as of the
date hereof no condition has occurred or remains unfulfilled that would allow
cancellation or termination of the Lease by either party thereto or that would
allow Lessor to require any payment from Tenant other than the rent as stated in
the Lease.
9. That, to the knowledge of the undersigned, all applicable zoning,
environmental and other land use regulations, and all covenants, conditions and
restrictions affecting the demised premises, including without limitation those
contained in any mortgage or deed of trust, have been and are presently being
complied with.
10. That the undersigned has no knowledge of any processing, use,
storage, disposal, presence, release or treatment of any hazardous or toxic
materials or substances on or about the leased premises, except as set forth
below and except for normal cleaning substances used in the ordinary course of
business and not in violation of any environmental laws.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11. That Tenant has satisfied all commitments (economic and
otherwise) made to induce Lessor to enter into the Lease.
12. That there are no offsets or credits against rentals or other
payments payable under the Lease.
Exhibit G - 2
This certificate and agreement shall bind the undersigned and the
successors and assigns of the undersigned and shall inure to the benefit of your
successors and assigns.
Dated:
-------------------
Lessor
-----------------------------------
By:
--------------------------------
Its:
-------------------------------
Exhibit G - 3
EXHIBIT H
FORM OF OPINION OF O'MELVENY & XXXXX LLP
[Closing Date]
[name]
as Representative of the Selling
Stockholders mentioned below
[address]
Ladies and Gentlemen:
We have acted as special counsel to Western Real Estate Services,
Inc., a California corporation ("Buyer"), Western Investment Real Estate Trust,
a California trust ("Western"), and __________, a Delaware limited partnership
("DownREIT" and, together with Buyer and Western, the "Western Parties"), in
connection with the purchase or contribution of all of the outstanding capital
stock of Xxxxxx'x Food Stores, Inc., an Oregon corporation ("the Company"),
pursuant to the Stock Purchase and Contribution Agreement dated as of September
3, 1998 (the "Agreement") by and among Buyer, Western, the Company and the
entities listed in SCHEDULE 1.0 to such agreement (each a "Selling Stockholder"
and, collectively, "Seller"). Among other matters, the Agreement provides for
the contribution of a portion of the Stock to DownREIT. This opinion is
rendered to you pursuant to Section 7.3(b) of the Agreement. Capitalized terms
used herein without definition have the same meanings as set forth in the
Agreement.
In our capacity as such counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction as being true copies, of
the Agreement and such corporate records of the Western Parties, certificates of
public officials and of officers of the Western Parties, and other documents as
we have deemed necessary for the purpose of this opinion. We have assumed the
genuineness of the signatures (except for those of the officers of the Western
Parties), the authenticity of all items submitted to us as originals, the
conformity with originals of all items submitted to us as copies, the due
authority of all persons executing the same (other than the due authority of
officers of the Western Parties) and that each natural person who is a party to
the transaction has sufficient capacity to enter into and carry out his or her
obligations under the Agreement. As to material matters of fact, we have, when
relevant facts were not independently established, relied upon the statements
and certificates furnished to us, copies of which are attached to this opinion.
On the basis of such examination and our consideration of such
questions of law as we have deemed relevant in the circumstances, we are of the
opinion, subject to the assumptions, qualifications and limitations set forth
herein, that:
1. Each of Buyer and Western has been duly organized and is validly
existing and in good standing under the laws of the state of California with
corporate or trust power, as applicable, to own its properties and conduct its
business, to enter into the Agreement
Exhibit H-1
and to carry out the provisions of the Agreement (including entry into and
performance of the Partnership Agreement) and, in the case of Buyer, to acquire
the Stock. Based solely on a review of certificates of public officials, Buyer
is qualified to do business in the State of Oregon.
2. DownREIT is a duly formed and validly existing limited
partnership under the laws of the State of Delaware with the power under
Delaware Revised Uniform Limited Partnership Act (the "Act") and its partnership
agreement (the "Partnership Agreement") to own its property and assets and to
perform its obligations as contemplated by the Agreement and the Partnership
Agreement. Based solely on a review of certificates of public officials,
DownREIT is registered as a foreign limited partnership to transact intrastate
business in California and is qualified to do business in the State of Oregon.
3. Neither the execution, delivery and performance of the Agreement
and the Partnership Agreement nor the acquisition of the Stock will (a) conflict
with, result in a breach by any of the Western Parties of, or constitute a
default under, the Articles of Incorporation or Bylaws, Declaration of Trust or
Partnership Agreement, as applicable, of such Western Party, or (b) violate any
Order or Law applicable to the Western Parties or any of their respective assets
of which we are aware.
4. The Agreement has been duly authorized by all necessary
corporate and trust action on the part of Buyer and Western, respectively, and
the Agreement has been duly executed and delivered by each of Buyer and Western.
5. The Partnership Agreement has been duly authorized by all
necessary trust action on the part of Western and the Partnership Agreement has
been duly executed and delivered by Western.
6. Except for those approvals and consents that have been obtained,
the consummation of the acquisition of the Shares by Buyer and the DownREIT and
the issuance of DownREIT Units by the DownREIT does not require the approval or
consent of any United States Federal or California Governmental Entity or, to
our knowledge, any other person or entity.
7. Based solely, with your consent, upon a review of the records
certified to us as the partnership records of the DownREIT and the Partnership
Agreement, (a) prior to the contribution of shares of Stock to the DownREIT,
Western is the sole general partner of the DownREIT and ____ is the sole limited
partner of the DownREIT and (b) there are no outstanding options, rights or
commitments granted by the DownREIT to, and the DownREIT is not obligated to,
issue, purchase or redeem any DownREIT Units, other than pursuant to the
Agreement and the Partnership Agreement.
8. Assuming the accuracy of Buyer's representations in Section
10.10 of the Agreement, and the accuracy of each Electing Stockholder's
representations in its Investor Suitability Questionnaire, it is not necessary
in connection with (a) the sale or contribution, as the case may be, and
delivery of the Stock to Buyer and DownREIT, as applicable, or (b) the delivery
of DownREIT Units to the Electing Stockholders in exchange for shares of Stock,
in each case under the circumstances contemplated by the Agreement, to register
either the Stock or the DownREIT Units under the Securities Act of 1933, as
amended, or to qualify the offer or
Exhibit H-2
sale of the Stock or the DownREIT Units under the California Corporate
Securities Law of 1968, as amended.
Our use of the terms "known to us," "to our knowledge," "of which we
are aware" or similar phrases to qualify a statement in this opinion means that
those attorneys in this firm who have given substantive attention to the
representation described in the introductory paragraph of this opinion do not
have current actual knowledge that the statement is inaccurate. Such terms do
not include any knowledge of other attorneys within our firm (regardless of
whether they have represented or are representing the Western Parties in
connection with any other matter) or any constructive or imputed notice of any
matters or items of information. Except as otherwise expressly indicated, we
have not undertaken any independent investigation to determine the accuracy of
the statement, and any limited inquiry undertaken by us during the preparation
of this opinion letter should not be regarded as such an investigation. No
inference as to our knowledge of any matters bearing on the accuracy of any such
statement should be drawn from the fact of our representation of the Western
Parties in connection with this opinion letter or in other matters. We call
your attention to the fact that our engagement is limited to specific matters as
to which we are consulted by the Western Parties.
We express no opinion concerning (a) the laws of any jurisdiction
other than California or the United States, (b) choice of law or antitrust law
matters (including matters under the Xxxx-Xxxxx-Xxxxxx Act) or, (c) except for
the opinions in paragraph 8, securities law matters.
This opinion is solely for your benefit in connection with your sale
of the Stock and related transactions and may not be relied upon by, nor may
copies be delivered to, any other Person or for any other purpose, without, in
each case, our prior written consent.
Respectfully submitted,
Exhibit H-3
EXHIBIT I
SUBSTANCE OF CLOSING BALANCE SHEET LETTER
OF XXXXX WHITE XXXXXXXX & XXXX LLP
1. We are independent certified public accountants with respect to
the Company and its Subsidiaries within the meaning of the Securities Act of
1933 (the "Act") and the applicable published rules and regulations and:
2. On the basis of a reading of the latest available respective
interim financial statements of the Company and its Subsidiaries, inquiries of
officials of the Company and its Subsidiaries responsible for financial and
accounting matters and the performance of other specified agreed-upon
procedures, nothing came to our attention that caused us to believe that the
Closing Balance Sheet of the Company and its Subsidiaries, dated as of [date],
prepared by the Company for the purpose of determining adjustments to the
Purchase Price, as defined in the Stock Purchase and Contribution Agreement (the
"Purchase Agreement"), and delivered to Buyer (the "Closing Balance Sheet"), are
not presented in conformity with the valuation procedures described in Section
1.4(b) of the Purchase Agreement and otherwise in accordance with generally
accepted accounting principles applied on a basis consistent with that of the
respective reviewed financial statements of the Company and its Subsidiaries,
dated as of November 29, 1997.
3. On the basis of a limited review of federal and state income tax
returns of the Company, inquiries of officials of the Company responsible for
tax matters and other specified procedures, nothing has come to our attention
which has caused us to believe that Taxes (as defined in the Purchase Agreement,
in all material respects, have not been paid or adequately provided for on the
books and records of the Company and its Subsidiaries, as appropriate, for the
periods covered thereby. In addition, we have also performed a limited review
to ascertain the amount of applicable federal and state income taxes for the
period _________________, 19__ to the date of the Closing Balance Sheet and have
determined that either such taxes have been paid or adequate reserves have been
established for payment of such taxes.
Exhibit I-1
EXHIBIT J
SUBSTANCE OF RULE 3-14 AUDIT REPRESENTATION LETTER
[date]
KPMG Peat Marwick LLP
Three Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
ATTN: Xx. Xxxxxx X. Xxx, Partner
Ladies and Gentlemen:
We are providing this letter in connection with your audit of the
Historical Statement of Gross Income and Direct Operating Expenses of Xxxxxx'x
Food Stores, Inc. and subsidiaries (the Statement) for the year ended November
29, 1997 for the purpose of expressing an opinion as to whether the Statement
presents fairly, in all material respects, the gross income and direct operating
expenses, exclusive of depreciation, interest, management fees and income taxes,
of the Company in conformity with generally accepted accounting principles.
Certain representations in this letter are described as being limited
to matters that are material. Items are considered material, regardless of
size, if they involve an omission or misstatement of accounting information
that, in the light of surrounding circumstances, makes it probable that the
judgement of a reasonable person relying on the information would be changed or
influenced by the omission or misstatement.
We confirm, to the best of our knowledge and belief, the following
representations made to you during your audit.
1. The Statement referred to above is fairly presented in
conformity with generally accepted accounting principles.
2. We have made available to you all financial records and
related data.
3. There have been no:
a. Instances of fraud involving management or
employees who have significant roles in internal
control.
b. Instances of fraud involving others that could
have a material effect on the financial
statements.
Exhibit J-1
c. Communications from regulatory agencies concerning
noncompliance with, or deficiencies in, financial
reporting practices.
d. Violations or possible violations of laws or
regulations, the effects of which should be
considered for disclosure in the financial
statements or as a basis for recording a loss
contingency.
4. There are no:
a. Unasserted claims or assessments that our
lawyer(s) has (have) advised us are probable of
assertion and must be disclosed in accordance
with Statement of Financial Accounting Standards
(SFAS) No. 5, Accounting for Contingencies.
b. Other liabilities or gain or loss contingencies
that are required to be accrued or disclosed by
SFAS No. 5.
c. Material transactions that have not been properly
recorded in the accounting records underlying the
Statement.
d. Events that have occurred through the date of this
letter that would require adjustment to or
disclosure in the Statement.
5. The Company has complied with all aspects of contractual
agreements that would have a material effect on the
Statement in the event of noncompliance.
6. The Company has satisfactory title to all owned assets
and there are no liens or encumbrances on such assets nor
has any asset been pledged as collateral.
7. Related party transactions and related amounts receivable
or payable, including sales, purchases, loans, transfers,
leasing arrangements and guarantees have been properly
recorded or disclosed in the Statement.
8. Provision, when material, has been made for:
a. Losses to be sustained in the fulfillment of, or
from inability to fulfill, any sales commitments.
b. Loses to be sustained as a result of purchase
commitments for inventory quantities in excess of
normal requirements or at prices in excess of the
prevailing market prices.
c. Losses to be sustained as a result of the
reduction of excess or obsolete inventories to
their estimated net realizable value.
Exhibit J-2
d. Losses to be sustained as a result of
other-than-temporary declines in the fair value of
investments.
9. All sales transactions entered into by the Company are final and
there are no side agreements with customers, or other terms in
effect, which allow for the return of merchandise, except for
defectiveness or other conditions covered by the usual and
customary warranties.
10. Provision has been made for any material adjustments to
long-lived assets, certain identifiable assets and related
goodwill in accordance with SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed of.
Further, we confirm that we are responsible for the fair presentation
in the Statement of gross income and direct operating expenses in conformity
with generally accepted accounting principles.
Very truly yours,
Exhibit J-
